“RISK” is a four-letter word in the phrase “Supply Chain Risk Management (SCRM)”. Conversations on “RISK” are often avoided in the workplace. If so, there will be some barriers to overcome if SCRM is going to be embedded into your company’s culture. Making a CHANGE on how “RISK situations” are managed may have its’ challenges. “Culture eats Strategy for breakfast!” (a Phrase that Bill Moore and Jerry Rose coined, but is often attributed to Peter Drucker).
Since managing RISK is fundamental to implementing SCRM, what is the best approach to introduce RISK to your company?
Developing a strategy on how to best introduce “Risk Management” concepts (Figure 1: Level 1) into your company is the first step to initiate your SCRM journey. This strategy may require a very structured branding strategy within your company to initiate momentum for the SCRM program.
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Figure 1: Supply Chain Risk Management Development Journey.
- Characterize the of Your Company –> Gain Culture Understanding
Once the executive team and SCRM champions have internalized the vocabulary (LEVEL 1: EDUCATION), the first major collaborative activity is to develop a way to integrate SCRM principles with the “hearts and minds” of the company. Assessing the company’s RISK appetite (where we are today and where we want to go relative to other priorities) is a first major step to initiating Level 2: AWARENESS.
It is not uncommon for management to avoid discussing RISKs, since it can imply poor performance or decision-making. Common reactions to business challenges include: “it will never happen again”, “we could never foresee it ever happening again”, “we are dealing with unknowns, we should only focus on the knowns (controllable actions)”.
Figure 2: SCRM Culture Transformation Level 2 (Awareness) Recognize Vulnerabilities
This protective mindset creates vulnerabilities. Therefore, to move forward, we need to understand how to build a protective shield to proactively address these vulnerabilities without adding decision-making complexity. Decision-Making complexity often creates stymied management siloed decisions, resulting in decreased supply chain throughput and increased cost. Therefore, a judicious and practical cross-functional RISK Protection Shield should be developed.
A well-coordinated communications program (branding strategy) will proactively address cross-functional “siloed” stakeholders paradigms and barriers: “the grass is greener on the other side”; “they have it better”; “if they would just do …”. Openness and candor is paramount in gaining TRUST across the organization.
RISK-based crucial conversations are the first step to identify RISK phrases that are considered too controversial to discuss. Once identified, cross-functional teams will uncover the constraints that prevent the overall success of the company versus their individual siloed goals. These constructive crucial conversations will stimulate opportunities to address what was previously believed to be unknown knowns (uncontrollable one-of-kind) costly RISKs.
BLOG Question 1: Please share best practices on how to create an environment in which RISKs are proactively discussed and managed.
- Define Current Rules of Engagement à Recognize Supply Chain Vulnerabilities
There are number of words that fall into this culture SENSITIVE category such as: “what is in RED today”, “what are the RISKS in our plan going forward?”, “how do we address our VULNERABILITIES?”.
Therefore a change in company mindset needs to take place to address compelling questions such as “what are our risks in our supply chain?” “What is the best approach to initiate building an environment where we can start understanding and proactively addressing supply chain risks?”
Figure 3: Culture Adoption of a New Concept
It is generally accepted that we do not enjoy going through CHANGE (Figure 3). CULTURE eats any attempt to CHANGE anything. Your company’s culture needs to find a reason to want to indoctrinate the principles of SCRM into the hearts and minds of your employees (e.g., “Is it worth the climb?”). Culture adoption often requires taking a step back and looking at the “big picture” and asking why do we care relative to our other priorities and will we get rewarded by introducing this new concept called SCRM.
1) First we need to be honest and realistic of current cultural environment’s ability to take on a new idea (program in our company). What is our company’s heartbeat (essence)? Are we currently ready to insert “RISK” into our company’s vocabulary? If not, what are the steps for your culture to begin the SCRM journey from theory to practice? (EDUCATION)
2) Once we prepare ourselves for the change journey that we will be taking by introducing a new vocabulary into our environment, we need to accept that there are potential Risks that we currently believe are uncontrollable. We need to move our mindset from reacting to eliminating or mitigating in the future. (AWARENESS)
BLOG Question 2: is your team comfortable to openly discussing “RISKS” within your Supply Chain? If we are to take Supply Chain Risk Management (SCRM) seriously, should we work to establish a “RISK” branding strategy?
In our next BLOG we will discuss continuing the Supply Chain Risk Management transformation journey on how to overcome the “bumps in the road”.
Supply Chain Risk Management Culture Transformation with RISK Management Approaches
The SCRM Consortium deployment approach is a five-stage roadmap to develop SCRM capability (Education, Awareness, Assessment, Mitigation and Management). While, the first stages are academic, the transition to practical stages is purposeful. Transitioning from academic to practical, SCRM concepts move from general vocabulary, assessment, case studies to alignment (mitigation and management) within “day-to-day” business decision-making and cadence.
