How To Work With Risk
How To Work With Risk
How To Work With Risk
How To Work With Risk
Leaders risk reputation in order to make progress. Business people risk dollars in order to make a profit. Life and work are full of risk, and leadership requires working with risk. And, overly avoiding risk can mean abdicating the very responsibilities we have been given as leaders.
Leaders risk reputation in order to make progress. Business people risk dollars in order to make a profit. Friends and family members risk their personal preferences — and sometimes even their lives — to care for others.
Life and work are full of risk. Leadership requires working with risk. And, overly avoiding risk can mean abdicating the very responsibilities we have been given as leaders.
Work With Risk
Working with risk can produce outstanding results. In financial services, the objectives of sales and marketing are often the opposite of the objectives of risk management. However, when the groups work together, results can be outstanding.
One of the most rewarding parts of my career was working between the corporate silos of sales and marketing and risk management. It was not easy. The groups had not worked well together in the past and were skeptical of each other — especially around big new ideas. One of those big new ideas was automating loan decisions — in some cases even before the borrowers requested a loan.
Risk management was concerned about losing detailed file review and control of the individual loan decisions. Marketing was concerned the criteria was too tight and customers would get frustrated. Instead, we learned that we could increase sales and reduce loan default risk by working together. Combining the criteria of what makes a profitable loan along with what makes a loan less likely to default lowered the cost of marketing and improved customer satisfaction — all because we didn’t waste people’s time with offers the bank was not willing to approve.
Not Heroes but Stewards
Of course, we were not heroes, we were just doing our jobs as stewards of company resources. Customers expect companies to provide an excellent experience. Executives and shareholders expect collaboration between departments to produce growth and value.
Whether you are the owner of a business, the CEO, a middle manager, or a first year intern, we are all tasked with stewarding what we have been given and that involves risk. The same is true for what God has given us, but in a much more significant way. God has given us much to steward — starting with our own lives.
Risk Assessment For Business
In Harvard Business Reviews’, A Manager's Guide to Strategic Risk, they write, “Every organization faces a unique set of strategic risks based on factors such as your industry, competitive position, sources of revenue and profit, and brand strengths.” They offer 6 steps to approach risk.
- Identify and assess your risks — For each type of risk you identify, consider the following; severity, probability, timing, and changing probability
- Map your risks — Plot these factors so you can see them in one place.
- Quantify your risks — Risks should be comprehensively measured in a common currency.
- Identify the potential upside for each risk — What could happen if a key risk is reversed?
- Develop risk mitigation action plans — For every major risk identified there should be a team responsible for preparing a formal mitigation plan. This document will outline the risk assessments made in earlier steps — including, the nature of the risk, root causes, and percentage of market value that would be affected.
- Adjust your capital decisions accordingly — After drawing up an explicit profile of the risks it faces, a company may want to change its capital allocations.
A Biblical Approach
God gives us the temporal to help us understand how to live with the eternal. The approach to good stewardship for a business has lots of parallels for our lives as we lead our organizations and our families. The Bible helps us understand how to be better risk managers of everything on earth. Each of the 6 steps Harvard Business Review offers takes new life and direction through viewing temporal risk as God — who knows all things and takes no risks — intends for us to view risks.
Risk Is For The Glory Of God
“For from him and through him and for him are all things. To him be the glory forever! Amen.” – Romans 11:36
When we know we are God’s, that everything in our life is from God, that all the power we are given is through God, and is for the purposes of glorifying God, then this changes how we view, identify, assess, map, and quantify risk (HBR steps 1-3).
- Our identity is in God — so we are not looking for other people or accomplishments to validate us. The world is telling us to make a name for ourselves, but God says we are His. “Save me, for I am yours; I have sought out your precepts.” (Psalm 119:94). Tim Keller says, “When our identity is in God…there is never any risk to your real assets…things can come, things can go.”
- God has all the power — so we understand we don’t control outcomes. We create enormous stress in our life by making claims about what we will do. Then, we are stuck trying to fulfill those claims without ultimate control over all the factors. “Now listen, you who say, ‘Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.’ Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes. Instead, you ought to say, ‘If it is the Lord's will, we will live and do this or that.’ As it is, you boast in your arrogant schemes. All such boasting is evil.” – James 4:13-16
- God gets all the glory — so we don’t seek our own kingdoms. We work as stewards in God’s kingdom putting all things under His Lordship (The Way To Build — Surrendered Ownership).
- Then, our life is filled with less worry over risk and with more freedom, meaning, and hope. “But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.” – Matthew 6:33-34
Our Response Is Worship
“Therefore, I urge you, brothers and sisters, in view of God's mercy, to offer your bodies as a living sacrifice, holy and pleasing to God — this is your true and proper worship.” – Romans 12:1
Our response to God's sovereignty, mercy, and grace of being made alive in Christ when we deserved death (Ephesians 2:5) is to spend all of our moments and actions — our very lives — in worship. Talk about the upside of risk (HBR step 4) — we go from deserving nothing to inheriting everything! We are given the privilege of stewarding our lives as instruments of worship to God as we sacrifice our daily preferences so that others can know the love of God.
David Platt put it this way, “Spend your lives spreading the gospel of God for the glory of God to the ends of the earth. As you go, trust in his sovereign authority, depend on his indwelling presence, and experience his incomparable joy.”
Transformational Risk
“Do not conform to the pattern of this world, but be transformed by the renewing of your mind. Then you will be able to test and approve what God's will is — his good, pleasing and perfect will.” – Romans 12:2
Our risk mitigation and capital allocation plans (HBR steps 5-6) become simplified and joy filled. We sell everything for the main thing. “The kingdom of heaven is like treasure hidden in a field. When a man found it, he hid it again, and then in his joy went and sold all he had and bought that field.” – Matthew 13:44
When our desires are transformed toward the will of God, the aim of our hearts, minds, souls, is to please God. The free will God gives us provides agency to steward the assets He has placed in our trust. As Tim Keller says, “There is a real compatibility between God's sovereignty and what we do.” God controls the ultimate outcomes. Our job is to be faithful with all He gives us.
The free will we have allows us to test and prove our faithfulness as well as our competencies in the various areas of our life and work,
There is an overwhelming joy that comes from stewarding all the God has given us. When we loose the chains of the temporary things we can’t hold on to anyway and move faithfully into managing our lives and assets for the kingdom of God, there is joy for evermore!
Resources
Leaders risk reputation in order to make progress. Business people risk dollars in order to make a profit. Friends and family members risk their personal preferences — and sometimes even their lives — to care for others.
Life and work are full of risk. Leadership requires working with risk. And, overly avoiding risk can mean abdicating the very responsibilities we have been given as leaders.
Work With Risk
Working with risk can produce outstanding results. In financial services, the objectives of sales and marketing are often the opposite of the objectives of risk management. However, when the groups work together, results can be outstanding.
One of the most rewarding parts of my career was working between the corporate silos of sales and marketing and risk management. It was not easy. The groups had not worked well together in the past and were skeptical of each other — especially around big new ideas. One of those big new ideas was automating loan decisions — in some cases even before the borrowers requested a loan.
Risk management was concerned about losing detailed file review and control of the individual loan decisions. Marketing was concerned the criteria was too tight and customers would get frustrated. Instead, we learned that we could increase sales and reduce loan default risk by working together. Combining the criteria of what makes a profitable loan along with what makes a loan less likely to default lowered the cost of marketing and improved customer satisfaction — all because we didn’t waste people’s time with offers the bank was not willing to approve.
Not Heroes but Stewards
Of course, we were not heroes, we were just doing our jobs as stewards of company resources. Customers expect companies to provide an excellent experience. Executives and shareholders expect collaboration between departments to produce growth and value.
Whether you are the owner of a business, the CEO, a middle manager, or a first year intern, we are all tasked with stewarding what we have been given and that involves risk. The same is true for what God has given us, but in a much more significant way. God has given us much to steward — starting with our own lives.
Risk Assessment For Business
In Harvard Business Reviews’, A Manager's Guide to Strategic Risk, they write, “Every organization faces a unique set of strategic risks based on factors such as your industry, competitive position, sources of revenue and profit, and brand strengths.” They offer 6 steps to approach risk.
- Identify and assess your risks — For each type of risk you identify, consider the following; severity, probability, timing, and changing probability
- Map your risks — Plot these factors so you can see them in one place.
- Quantify your risks — Risks should be comprehensively measured in a common currency.
- Identify the potential upside for each risk — What could happen if a key risk is reversed?
- Develop risk mitigation action plans — For every major risk identified there should be a team responsible for preparing a formal mitigation plan. This document will outline the risk assessments made in earlier steps — including, the nature of the risk, root causes, and percentage of market value that would be affected.
- Adjust your capital decisions accordingly — After drawing up an explicit profile of the risks it faces, a company may want to change its capital allocations.
A Biblical Approach
God gives us the temporal to help us understand how to live with the eternal. The approach to good stewardship for a business has lots of parallels for our lives as we lead our organizations and our families. The Bible helps us understand how to be better risk managers of everything on earth. Each of the 6 steps Harvard Business Review offers takes new life and direction through viewing temporal risk as God — who knows all things and takes no risks — intends for us to view risks.
Risk Is For The Glory Of God
“For from him and through him and for him are all things. To him be the glory forever! Amen.” – Romans 11:36
When we know we are God’s, that everything in our life is from God, that all the power we are given is through God, and is for the purposes of glorifying God, then this changes how we view, identify, assess, map, and quantify risk (HBR steps 1-3).
- Our identity is in God — so we are not looking for other people or accomplishments to validate us. The world is telling us to make a name for ourselves, but God says we are His. “Save me, for I am yours; I have sought out your precepts.” (Psalm 119:94). Tim Keller says, “When our identity is in God…there is never any risk to your real assets…things can come, things can go.”
- God has all the power — so we understand we don’t control outcomes. We create enormous stress in our life by making claims about what we will do. Then, we are stuck trying to fulfill those claims without ultimate control over all the factors. “Now listen, you who say, ‘Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.’ Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes. Instead, you ought to say, ‘If it is the Lord's will, we will live and do this or that.’ As it is, you boast in your arrogant schemes. All such boasting is evil.” – James 4:13-16
- God gets all the glory — so we don’t seek our own kingdoms. We work as stewards in God’s kingdom putting all things under His Lordship (The Way To Build — Surrendered Ownership).
- Then, our life is filled with less worry over risk and with more freedom, meaning, and hope. “But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.” – Matthew 6:33-34
Our Response Is Worship
“Therefore, I urge you, brothers and sisters, in view of God's mercy, to offer your bodies as a living sacrifice, holy and pleasing to God — this is your true and proper worship.” – Romans 12:1
Our response to God's sovereignty, mercy, and grace of being made alive in Christ when we deserved death (Ephesians 2:5) is to spend all of our moments and actions — our very lives — in worship. Talk about the upside of risk (HBR step 4) — we go from deserving nothing to inheriting everything! We are given the privilege of stewarding our lives as instruments of worship to God as we sacrifice our daily preferences so that others can know the love of God.
David Platt put it this way, “Spend your lives spreading the gospel of God for the glory of God to the ends of the earth. As you go, trust in his sovereign authority, depend on his indwelling presence, and experience his incomparable joy.”
Transformational Risk
“Do not conform to the pattern of this world, but be transformed by the renewing of your mind. Then you will be able to test and approve what God's will is — his good, pleasing and perfect will.” – Romans 12:2
Our risk mitigation and capital allocation plans (HBR steps 5-6) become simplified and joy filled. We sell everything for the main thing. “The kingdom of heaven is like treasure hidden in a field. When a man found it, he hid it again, and then in his joy went and sold all he had and bought that field.” – Matthew 13:44
When our desires are transformed toward the will of God, the aim of our hearts, minds, souls, is to please God. The free will God gives us provides agency to steward the assets He has placed in our trust. As Tim Keller says, “There is a real compatibility between God's sovereignty and what we do.” God controls the ultimate outcomes. Our job is to be faithful with all He gives us.
The free will we have allows us to test and prove our faithfulness as well as our competencies in the various areas of our life and work,
There is an overwhelming joy that comes from stewarding all the God has given us. When we loose the chains of the temporary things we can’t hold on to anyway and move faithfully into managing our lives and assets for the kingdom of God, there is joy for evermore!
Resources