Submitted by: Ian Waxman, Principle, Navigate
Any successful business leader will tell you that every opportunity worth pursuing requires taking some amount of risk. Yet, with regular headlines describing companies struggling to address cyber-terrorism, new competitive threats and the whims of the economy, risk can no longer be viewed as something we are helpless to control. We have gained retrospection and learned some key lessons – and know now that the best approach to risk management is a proactive, strategic one.
Risk management has become a priority for companies’ executives and their Boards of Directors, and is a critical ingredient to a sound corporate strategy. While some unique risks vary by organization, industry, and geography, here in Philadelphia we see common issues impacting our businesses and the region as a whole.
Craig Snyder, president and CEO of the World Affairs Council of Philadelphia, defines risk as the potential for disruption: “We live in an age of disruption, where that which can’t be anticipated is going to happen, and we must be on alert for the ‘unknown’.” Particularly, he notes, significant risks stem from the unprecedented rate of technological, political, and economic change. And while disruption related to technology may bring about new benefits (for example, innovations in healthcare), it can also lead to the elimination of jobs and even the obsolescence of some companies. Further, risk related to terrorism, natural disasters, and cyber-security breaches, among others, may bring about disruption that bear no value for today’s enterprise, yet need to be prepared for thoughtfully and practically.
Rob Wonderling, President and CEO of the Chamber of Commerce for Greater Philadelphia, noted some of the key industries vital to business in our region and some risks specific to each. For example, Philadelphia is a national leader in healthcare, an industry undergoing tremendous change such as the transition of the ownership of health data towards the consumer. “Electronic medical records are the most sought-after data on the ‘black market,’ carrying a higher value than any other that digital thieves want to hack and obtain.
Nonetheless, healthcare innovation is key to economic growth, so these risks need to be accepted and actively managed by all parties to the healthcare transaction.” Another significant area of risk pertains to Philadelphia as a home for many major supply chain companies. Wonderling points out that the ability to share and exchange data with customers is emerging as a marketplace differentiator for suppliers, but that the risks associated with these new market opportunities must be managed carefully.
Energy is another sector instrumental to our region’s business vitality; it, too, presents a complex set of risks. John Walsh, president and CEO of UGI Corporation, is well aware of these challenges: “How well we address the risks of inadequate energy infrastructure has wide-ranging impacts on all stakeholders – industrial, commercial and families – with far-reaching economic, financial and social impacts, to name a few.” He also notes that his, like all companies, must protect against cyber attacks, not only on company and customer data, but also against physical assets which are increasingly operated digitally.
Education is a clear concern among Philadelphia business leaders – and seen as a very real threat to the local economy. Walsh wonders ”how good a job we are doing as corporate citizens – and society as a whole – to drive development of better education systems, to ensure students are being given the educational foundation to position them for long-term success, and to meet future talent demands.” Wonderling agrees that the education system brings about its own set of risks, including the rise of tuition costs as a result of colleges and universities facing an increased burden to comply with complex regulations. “We need to re-shape the ‘business model’ in order to drive quality outcomes in education.”
Since refusing to embrace “risky” opportunities is not an option for today’s businesses, what can individual company leaders do to better manage risk? The first step is identifying the most impactful and complex risks the business is facing and developing a plan to manage them head-on. This often entails re-thinking business assumptions, challenging management’s biases, and shaking up the status quo in order to creatively and collaboratively drive a response to risk. The approach must be clear and consistent throughout the organization to enable the identification, assessment, and monitoring of all types of risk, and each employee should be trained and tasked to be on alert and to help limit the impact of risk-related events.
With the incredible pace of change not showing any signs of slowing, and the Philadelphia region continuing to serve as such a vibrant innovation space, our business community can’t afford to make risk management anything less than a top priority, one that permeates every organization. Our city has a long history of working together to make amazing things happen. By making risk management a focus area and key business imperative, we can continue this track record of shared success.
