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The role of leadership in risk management

The role of leadership in risk management

Author: Andrew Abu-Bakar, head of risk services

Actions speak louder than words: the importance of positive role models

An assessment of an organisation’s risk maturity will often consider process, data quality, tools and training, but whilst risk behaviour is harder to measure, it’s this that really determines whether risk is being actively managed. The idea of organisational risk culture is linked to the fact that individuals’ behaviour is in part driven by their environment, including the behaviour of others. Leaders have a particularly important role in shaping the risk culture of a project team, and in this blog, I’m going to explore how a leaders’ behaviour (what they say and do) influences the effectiveness of project risk management.

The parallels with safety

Efforts over the past few decades to improve organisational safety culture have focused on reinforcing the paramount importance of safety across the organisation at all levels, recognising every individual’s role in creating and maintaining a safe working environment.

As part of this drive, behavioural techniques have been developed to help understand and shape individuals’ actions, with the aim of improving safety performance. The ABC model (Antecedents > Behaviour > Consequences) allows us to evaluate how prompts and consequences affect people’s words and actions, and research has shown that consequences are particularly powerful in shaping behaviour. Positive consequences (reward, acknowledgement, etc) mean we’re more likely to repeat a behaviour, whereas negative consequences (being dismissed, criticised – or more drastic outcomes such as the threat of losing one’s job) will provide a dissuasive effect.

Another behavioural management concept is the consequence chain: the idea that while at work, we receive consequences (positive or negative) from our line manager or team leader. Reinforcement of desired behaviour is most powerful when it comes from our line manager, and this is where the link between risk practice and leadership comes in. Project leaders set the tone and help create the environment within which risk management is carried out. They also act as role models, defining what’s expected of the wider team through their actions as much as their words.

Let’s take a look at some of the ways in which project leaders influence the effectiveness of risk management:

 

Active participation

Those charged with leading our major projects have significant demands on their time and cannot be involved in every aspect of the risk process, but a little interaction goes a long way. The time dedicated to a particular activity signifies a leader’s view of its importance: a project director who considers development of risk information or review of analysis findings as someone else’s job is making a clear statement: risk management is not important.

Leaders also set expectations for the wider team: focusing on risk response progress and effectiveness in meetings with direct reports will prompt improvements to response planning and reinforce accountability for risk management. Providing positive and visible recognition to those who are actively managing risks will increase the chances that others will do likewise.

 

Balancing ambition with realism

High-profile projects come with a degree of ambition: delivering bigger, better, faster, cheaper – targets which undoubtedly help attract talent and generate the urgency required to sustain progress. To meet these aspirations, leaders’ performance is often measured against challenging project targets, and whilst this aligns personal and project objectives, it can have some unintended consequences.

Many risk managers will have encountered push back from a project manager when briefing changes in the modelled forecast. The results may be labelled “wrong” or “too pessimistic”, and whilst clearly this can be the case, there’s more often something else at play: confirmation and commitment biases lead us to reject information which doesn’t conform to our existing view, or to what we have promised to deliver.

Recipients of this kind of feedback from a manager (a negative consequence) will think twice about presenting similar information next time, whether they are a risk analyst, a project manager, or a programme director. The presence of this seemingly innocuous consequence in the chain can have undesired results, leading to the dilution or alteration of forecasts, optimistic reporting and delays in escalating critical threats so that the organisation cannot respond in a timely way.

Good project leaders drive the team to deliver on challenging targets, but they also help create an environment which supports discussion of less favourable outcomes.

 

Promoting collaboration

Large projects are often delivered by more than one organisation. Getting a joined-up picture of risk requires more than just a unified process: it relies on transparency between parties, suppliers and customer/client organisations. The way a senior manager talks about a supplier can have a powerful effect on their team’s approach to dealing with that organisation, providing tacit permission for a confrontational approach, or promoting a more collaborative attitude. Leaders are also responsible for setting priorities and objectives for project phases. A focus on self-serving goals – transferring risk to the other party; maximising profit or forcing down the price – might provide short term rewards, but it’s an approach that is likely to yield poor outcomes overall.

Effective risk management relies on collaboration and transparency between parties: understanding risks properly often requires deep subject matter knowledge, and so parties must be ready to share this knowledge to help protect the long-term success of the project.

 

So, what does risk leadership look like on your project? Is good risk management visibly rewarded, are project leaders active participants, and does their behaviour reinforce transparency and collaboration? These things are hard to measure, and some aspects are difficult to get right, but they are key to getting the most out of the risk process.

 

This blog was first published on the Association for Project Management website.