20^th century management used today cannot manage business risk as part of the business because the business is not organized or managed. 20^th century risk management is separate from the business and concentrates on areas of proven risk, but does not cover the normal risk that is present and should be managed in everything the enterprise does.

Risk is inherent in every business and must be managed as part of the business. But, risk can be managed as part of the business only by using Result-performance Management (R-pM) to organize and manage the actual business.

Risk tends to be managed by a risk management process

Most enterprises say they manage risk. Many have risk management functions or processes to prove it. Risk is managed by risk management structures laid over the business.

There are specialists and companies devoted to risk management. Many books have been written on risk management. But, do they point us in the right direction or tell us what we really should be doing to manage day-to-day risks we face in our businesses?

Risk is an inherent part of the business

We all face the risk that things we want done or to happen will not be done or happen as wanted. We cannot manage risk as routine management because we have never defined where risk really lies and what must be managed to reduce risk. We have never managed the business, so we cannot manage business risk. Many of our risk factors are seen as good excuses, rather than as something that should have been managed.

Risk is an attribute of results; that the result will not be produced as planned

Risk lies in the production of economic output results from the business on time and as desired. The uncertainty in producing results on time and as desired lies in performance. Therefore, risk management is a matter of properly managing business results and performance. Risk is an attribute of the result, and uncertainty is an attribute of performance.

Risk management should be part of the business routine

All enterprises face risks and need the capability to manage risk. Risk management is not just a matter of credit checking, hedging, and insurance. Risk management is the proper management of both internal and external performance required to produce every business result.

Risk management is a responsibility of result management

Result risk needs to be considered for each result. A high-risk, high-value result may need to be redefined to be a lower-risk, but lower-value result. A high risk result may need special solutions like hedging or insurance. Separate results may be required to check or monitor risk.

Result risk is a function of performance uncertainty

Risk arises from the uncertainty of performance. The enterprise needs to examine the uncertainty of each solution. Does a solution need backup in case of breakdown, illness, or outage? If the solution is external, dependent on performance outside of enterprise control, it still must be managed as an enterprise solution. The solution must perform to produce an enterprise result.

Performance uncertainty must be planned and managed to reduce result risk

Customer performance for positive decisions, timely payments, new orders, extended services, etc, must be managed or “handled” by the enterprise. Supplier performance for result quality, on-time result receipt, etc. must also be managed by the enterprise.

A customer or supplier lapse is not a good excuse. It is poor performance producing an unsatisfactory result, under the responsibility of the result manager.

R-pM manages risk as a part of the business in 21^st Century Management

The enterprise cannot manage result risk and performance uncertainty until the enterprise manages the results and performance solutions that comprise the business. R-pM provides new concepts and guidance for risk management and other 21^st Century Management breakthroughs in the R-pM Toolkit, your 21^st Century Management Manual,

The R-pM Toolkit, is available today and is under continual development to expand and refine 21^st Century Management. Get your R-pM Toolkit, with a subscription to future updates, at result-performance-management.com.

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This entry was posted on Tuesday, May 6th, 2008 at 01:51 and is filed under:
Forums: Administration and Capital Management, Corporate Investment and Governance, Business Change Methods, Strategy and Performance Management
Topics: Conventional Management Methods, Management Responsibilities, Performance Management, Result Management, Risk Management, Measuremant and Standards
Result-performance Management (R-pM): How the Business Benefits from R-pM
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