Successful risk managers embody behaviors that incorporate very specific qualities. Most importantly, knowing how to understand and embrace unpredictability can help you make more effective decisions at critical times. Here are some tips:
See unpredictability as an invitation to explore and discover rather than being rigid
- Embrace the nature of risk—imperfect solutions or solutions that cannot, by the nature of risk management, be 100% certain. This is not the territory of perfectionists, scientists, or even economists because we are not looking at evidence—we are looking at entrepreneurial, opportunistic behaviors that deliver value over time.
- Learn to tolerate the discomfort of uncertainty and unpredictability without feeling a sense of urgency to act or react; separate feeling urgency from acting urgently.
- Build flexibility to allow for responsiveness to opportunity; this looks like inviting differing opinions and approaches to create solutions rather than making either/or choices.
- Tolerate the feelings of being right and wrong without ego, pride, or fear of being right or wrong interfering in decision-making.
Respond to unpredictability by building predictable approaches and responses
- Practice discipline, vigilance, and fidelity when it comes to adopting a philosophical and organization approach to hedging.
- Adopt resiliency when recovering from “losses,” responding with evaluation, correction, and contextualization of what the “loss” means—insurance, ignorance, or neglect.
- See hedging gains and losses NOT as mistakes but as the cost of doing business.
- Ensure freedom to operate and make decisions.
- Accept the consequences and embrace the opportunities of making hard decisions, not as a result of winning or losing, but as the price for choosing to participate. Hedging performance, like a baseball player’s batting average, should be assessed based on the whole season. It is a management practice not a transaction.
- Be resourceful when seeking expertise, asking for help, benchmarking your choices and building plans.
- Fiercely conduct clarifying and correcting conversations in a direct manner that still preserves relationships by focusing on outcomes.
Does this mean that you can’t participate or manage risk successfully if you don’t have these qualities? Not necessarily. It does mean, however, that you want to build relationship and develop trust with someone who embraces these qualities.
Whether or not you’re the best decision maker in your company, when it comes to execution, you could be the best partner in empowering someone within your operation – or team of advisors – to lead the effort and assist you in evaluating the value of activities over time.
Editor’s Note: Karen Kerns is CEO of Kerns & Associates, a risk management firm serving agriculture in Ames, Iowa. The company employs a holistic approach to agricultural risk management, operating as an extension of clients' operations to ultimately enhance their customers’ profitability. For more information, call 515.268.8888, or go to http://www.kerns-associates.com/