Make uncertainty work for you
Misunderstandings and confusion hamper progress.
“A clear organization is a healthy organization,” notes an article at information provider Content Loop. “Clarity informs decisions and decisions enable execution.”
The problem? Clarity is evasive. But, even though some degree of uncertainty will exist, there are ways to approach understanding.
First, courage is required. Confident leaders confront problems and possess the audacity to ask questions. Courage has an element of choice—we either choose to identify issues and ask questions or we do not, the article notes.
Second, observe patterns of behavior. Become proactive in managing change; this is the path to advancement.
Finally, strategies seeking clarity must “test understanding” and solicit feedback. Consult staff to verify they know their roles and how they help meet objectives. How is success defined?
Misunderstandings and confusion hamper progress.
By the methodology the article outlines to seek clarity—namely, to ask questions; remain proactive; and solicit response—we might assume that uncertainty propels us toward success.
Confronting ambiguity forces consideration of status quo, prompts improvements, mitigates risk, and forges collaborations.
This week, learn how to make uncertainty work to your competitive advantage.
‘There is no security on this earth. There is only opportunity.’ --Douglas MacArthur
“Creative leaders don’t fear risk—they turn it into a money-making strategy,” notes a strategy+business article, “The Uncertainty Advantage.” One of the founders of the Chicago school of economics, Frank Knight, says uncertainty is “the state of facing risks that can’t be measured or foreseen.”
Your assets are at risk, and you do not know the level of risk you confront.
But this state is advantageous because if all risk was known to you, it would also be known to the competition. How would you find innovation?
“There is no better source of profit than your ability to first identify the opportunity hidden in disruptive forces and use it to differentiate,” the article notes.
Once you know the issue to resolve or capitalize upon, you have advantage, and “uncertainty becomes a precious asset instead of a liability.”
Companies who find advantage via uncertainty will:
- Find revenue and identify ways to grow;
- Realize greater returns in risk management when better targeted resources address the business model; and
- Enjoy accurate decision making when market reactions are anticipated and leaders know their company’s vulnerabilities.
“Often… the catalyst in bringing this approach to life is a simple inquiry… which leads to new awareness of potential profit,” the article says.
Do you know how to plan for a myriad of potential business outcomes? Entrepreneur provides five tips:
- Make frequent forecasts with ongoing assessment of both internal and external elements that are influential;
- Automate data analysis to gain efficiencies in understanding information;
- Grow collaborations and accountability by including all departments in planning;
- Create financial reports in time-saving ways by incorporating technology; and
- Enable self-service for others to join in planning and forecasting activity by providing helpful analysis tools not requiring intense training.
Data analysis is helpful in forecasting but it does not take into consideration instability. “Traditional approaches to strategy-analyzing trends [forecasts dedicated to ‘best’ actions] … tend to disregard the one thing we really do know about making projections: That they will be wrong.”
This insight, provided by Forbes, suggests uncertainty requires “an actionable portfolio of strategic actions” that allow flexibility rather than adherence to analysis results derived at a fixed point in time.
In such planning, leaders will:
- Define uncertainties and identify those that are important;
- Devise a variety of possible outcomes to understand threats and opportunities of each;
- Outline strategic possibilities to balance an action with flexibility during change; and
- Know market signals that prompt action via your already-determined response.
‘Distrust and caution are the parents of security.’ --Benjamin Franklin
Another critical aspect of handling uncertainty is preparedness that mitigates risk and protects vulnerabilities. What are your important considerations?
McKinsey & Co. reveals the particular importance of nonfinancial risk mitigation. Nonfinancial risks are those not directly related to the balance sheet and include things like compliance, processes, and cybersecurity, for example.
“Litigation and settlement of nonfinancial risk-control failures have cost the financial-services and corporate sectors several hundred billion dollars over the past ten years—and that does not include the impact of reputational damage,” the article notes.
McKinsey says nonfinancial risk needs to be part of discussion across the organization. One concern might be: Are the costs of controls too high in relation to value at stake?
“For many companies, this implies a full cultural transformation, so that a new set of risk-management processes can be as effective as possible.”
In absence of that, companies can expect repetition of errors. Further threats to company value are overlooked—thus jeopardizing the business.
Three objectives for good nonfinancial risk management:
- Better decision making needs to be a result of the mitigation plan—continuous monitoring of value chains and processes are required;
- Accountability is outlined such that management can determine organizational effectiveness, assign responsibility, and consider legalities—this proves to stakeholders controls are in effect; and
- Build a culture so that compliance risk is as important a consideration as cost management and revenue generation.
Supernal Software, a financial services risk management company, reveals “4 Risk Management Trends that will Dominate 2017.” Some of these trends continue from last year, while others are new on the scene.
First, financial institutions need to prepare for cybersecurity regulation. The New York Department of Financial Services is the first to propose such an initiative in the nation.
With it, cybersecurity programs will need to be customized for the particular needs of the institution, and regulation requires “periodic risk assessments.”
Second, financial providers need to know fintech companies are on the move and up for regulation. This will allow for more direct competition with traditional providers.
Third, be aware of a growing focus on enterprise risk management. This will require “forward-looking measuring and monitoring techniques” rather than use of historic data as risk metric.
Finally, look for growing importance of cybersecurity assessments. Hackers are creative and providers need to be on guard for new methodologies.
Lastly on risk mitigation, see “The Road Ahead: Nine Business Risks in 2017” according to Nasdaq. Keep an eye on integrated risk management; political change; digital strategy; big data and analytics; conduct risk; and reputation management.
Remaining risk considerations are: Succession, retention, and management; cyber risk; and third party/vendor risk.
Uncertainty can be a place of fear, or a realm of opportunity. Learn to use it to your advantage by spotting room for innovations; identification of possible collaborations; growing improvements at your enterprise; and determining how to mitigate risk.
Find the courage to ask a question in an uncertain environment; it will blaze your unique trail to progress and success.
LORA BRAY is a market intelligence analyst for CUNA’s economics and statistics department. Follow her on Twitter via @Bray_Lora and visit the CUNA blog, The Research Roundup: Economic Perspectives.