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Facing Risks Honestly Is a Business Requirement


Addressing Risk Honestly


Being familiar with our environment leads to overlooking risks that can bite us in the butt. Consider this true story: the manufacturer who refused to calculate his cost of rework, which sometimes was 30%. He ran out of capital, closed the doors, and put over 30 employees out of work. But recognizing, quantifying, and monitoring that reworks as a risk to his profit margin would have made a difference.


ISO 9001:2015 began dealing with risk more directly by requiring ‘risk-based thinking, especially in clause 6. Every business has risks, and the new requirement is meant to help us be honest about them, even as our own cognitive bias can cause us to miss them. Can we find more effective ways of ferreting out, defining, and monitoring risk?


A few reasons we overlook risk


Overconfidence bias – or, ‘the John Wayne syndrome.’ We may overestimate our own knowledge or competence, and don’t include all the day-to-day risks we handle without conscious thought. As leaders, if we aren’t encouraging others to learn risk-based thinking and point out risks, what are we missing that could torpedo our profit margin? This is often true of entrepreneurs, who know their business well but don’t see their own personal gaps and weaknesses.


Cognitive denial – to ignore information that sounds negative, to maintain the status quo. Rejecting information presented because “that can’t be right, our business is doing fine!” is a sure way to get run over and flattened by the risk when it becomes a full-blown reality. This can be the case, especially with a morale issue that nobody reports because they would be disbelieved, like harassment or bias against minority employees. One sure cure is a trusted source or three who can speak frankly and show us what we don’t see or want to hear. To recognize, admit and deal with negative-sounding information is a mature emotional skill that can help head off injuries, lawsuits, and worse.


Confirmation bias – is the opposite of cognitive denial, where we are only able to see or believe information that agrees with our treasured point of view. The cure is the same as above.


“We already know how” – like “we’ve always done it this way,” this shuts off new methods that could be more efficient. If you invented the process or learned it from a mentor, the new person using a different process looks like a threat, but they may be a gift instead.


Pointers: Facing Risk Squarely and Honestly

  1. Admit our own biases, including emotional attachments to our opinions and methods. In a management team, this can sound self-sabotaging but the reverse is actually true.

  2. Create a formal ‘safe harbor’ atmosphere or space to bring up gripes and proposed improvements. This admits that the current methods, attitudes or even the whole system, aren’t working to the best level. As in brainstorming, allowing anything to be brought up opens the field for more solutions.

  3. Make control of risks a team effort. For instance, documenting your processes is actually a form of risk control (ISO 9001:2015 addresses this under clause 4.4). A documenting team is more likely to catch more detail than just one person.

  4. Learn to see risk, and how it’s mitigated, all around us. (Do you drive that route to work to avoid left turns or dangerous intersections? Why cross the street at the light? Do we know how to work fire extinguishers, even if we’ve never had a fire? Do we have a night light in the kitchen, even if we think we know our way? Does this supplier have the only material for our critical jobs, in 500 miles, and can we find an alternate?) Seeing those risks as part of life, and knowing that we consciously or unconsciously deal with them, invites all team members into the discussion.

  5. Facts are our friends. The more we know about our operation, the more we can see trends and then control those risks. Where are the snags in our process? What op consistently runs late? Did we bid enough for this job, and are we going to be held to that price next time?

  6. Giving kudos to those who bring up improvements. Especially those dealing with employee safety, and especially something nobody has dared mention. Gift cards, public attention, or creating a new ‘safety guru’ or similar position, can motivate continuing risk mitigation, which is an improvement.


Continual improvement is part of being ISO certified, and everyone can have a part of us make the playing field open, clarify rules, and reward the players.


Are you ready to nail down risks and get ISO certified to 9001, or the employee-safety standard 45001? Call us at 720-980-2999 or email markm@pqacertification.com, or www.pqacertification for a free quote!

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