Management Systems Integration & Optimisation

What is a risk blind spot?

The simplest way to explain this concept is noted in the following statement: How many times in your career have you attempted to anticipate and identify risks associated with a specific outcome? More than a few times, however, the reality is more elusive. How many times have risks occurred that were not identified? Truth be told, these are the risks which hurt and it's often in our blind spot.

A risk blind spot can therefore be described as a risk that occurs which was inadvertently not anticipated.

Risk blind spots are inherently a challenge, in many cases they emerge as business and/or project interference that cost dearly often more than just finances for example reputation, people, value or delayed delivery. The reality is that all businesses face uncertainty. Importantly to thrive those who navigate uncertainty and adopt a means to embrace that uncertainty will invariably come out on top.

W. Edwards Deming is the pioneer in developing the well-known Plan–Do–Check–Act (PDCA) Model in the 1950s. He continually emphasised iterating towards an improved system, hence PDCA should be repeatedly implemented in spirals of increasing knowledge of the system that converge on the ultimate goal, each cycle closer than the previous.

Times have since moved on, with a particular focus on ‘understanding’ context. Several international best practice standards refer to this as “Establishing Context” which includes both internal and external factors. The value of understanding context and its influence on the entire management system cannot be underestimated. It is core to organisational performance because management systems are merely the enabler to achieve an organisation’s goals/objectives. Most international best practice standards have augmented their genetic code to align with risk-based thinking incorporating the likes of ISO 31000, Risk management – principles and guidelines. International standards that come to mind include Quality (ISO 9001), Environment (ISO14001), Asset (ISO55001) and Occupational Health & Safety (ISO 45001).

International best practice therefore requires users of the principles and methodologies to consider establishing context (understanding) before undertaking an effort to enhance performance adjustments to organisations. The PDCA cycle remains valid today as it did nearly 70 years ago however a tweak is required, specifically addressing deeper understanding before planning. It does not help to plan for that which you do not fully understand and the deeper the understanding, the better one can plan and execute to enhance operational performance.

The silver bullet resides around establishing context which means one needs to define the external and internal parameters that organisations need to consider. An organisation’s external context includes its external stakeholders. Its local, national, and international environment, as well as any external factors that influence its objectives. An organisation’s internal context includes its internal stakeholders, its approach to governance, its contractual relationships, its capabilities, culture, and standards. It is thus imperative to understand the context before employing the PDCA cycle noting the process remains true to continual improvement over time.

Context changes rapidly from digital disruption, social influence, and user requirements to risks often unknown therefore effort ought to be placed on deeper understanding. Often, in our experience, this is where the magic happens because contextual understanding provides leaders and management teams with insight that influences their organisational goals and objectives. Deeper contextual understanding can change the way people perceive success. John Locke stated: “The improvement of understanding is for two ends. First, our own increase of knowledge and secondly, to enable us to deliver that knowledge to others.”  Prompting that performance cannot be optimised without understanding.

Establish your blind spots

If one could determine “context” with greater certainty, or better yet, optimise context this would lay the foundation for risk identification accuracy and help us to circumvent risk blind spots. The value proposition of contextual optimisation is very clear. It defines the potential risk blind spots, meaning if you can determine the context of uncertainty, you stand a better chance identifying the blind spots that truly impact a business and/or project.

Nassim Nicholas Taleb states that “it’s better to be broadly right, rather than precisely wrong.” The complexity of uncertainty facing business and project delivery remains contentious. However, whilst being broadly right has its merits, it too can emerge as the epicentre for risk blind spots. As professionals our challenge is to embrace uncertainty, pioneer new ways to grapple with uncertainty and use risk management as a tool to fish out the risk blind spots.

At Deloitte, we have the experience and knowledge to assist your business/project in establishing a deep understanding of its context and its risk blind spots through our Management System team’s expertise.