The 5 A’s of Risk Management

The 5 A’s of Risk Management

Can you afford to turn down new business? On the surface, the answer is a resounding no, but the reasons to turn down an opportunity have nothing to do with how “busy” you are or whether you have the resources in place at that moment. Successful companies have developed a well-defined system to determine when to take the plunge and when to pass.

Asked to define the word “opportunity,” Ford’s president and CEO Alan Mulally took the fundamentally sound approach. He looked it up in the dictionary.

“One of the definitions is a good chance for advancement or progress,” Mulally told Lori Ann La Rocco, whose new book about Mulally’s impressive turnaround at Ford: Opportunity Knocking: Lessons from Business Leaders was just featured in Inc. Magazine.

When Mulally belted himself into the driver’s seat at Ford in 2006, the company had posted a loss of $12 billion. Eight years later, as he turns over the keys to his successor, Mark Fields, Ford posted an $8.6 billion profit last year and $1.4 billion in the first quarter of 2014.

Mulally’s sharp U-turn at Ford is a product of a wide array of management and financial skills, but he let La Rocco in on a key secret to his success. “Growth happens when a company emphasizes a strength and skips opportunities that exploit a weakness.”

Mulally shed Ford of distractions like Volvo and Jaguar – luxury lines that Ford acquired but never fit with their image – and concentrated instead on offering a complete line of vehicles to everyone from first-time buyers, to growing families, and even truckers.

But before making any of the above decisions, he always submitted them to a three-part checklist: 1) Weigh the risks of every opportunity 2) Be sure all opportunities support the vision and 3) be open to opportunistic gems.

Measuring risk versus opportunity is part art and part science.

Dr. David Hillson, an international risk management consultant and director of Risk Doctor & Partners, has devised a list of five “A-words” to help executives determine whether an opportunity is worth the risk.
• Affordable
Every new project entails some element(s) of risk. The trick is to determine those risks, figure out how much time, effort and money needs to be spent on addressing those risks, and set an agreed-upon budget for each degree of risk exposure.

• Achievable
Is the project technically feasible, or within the scope of your company’s capabilities? If the answer is yes, say yes. If not, don’t automatically reject it. You might discover that you can handle the project by hiring new staff, contracting to freelancers, or even expanding an existing division.

• Actionable
Determine an “action window,” or time frame in which the new project needs to get off the ground in order to minimize the costs and the risks. Some of those costs will have to be attended to immediately, while others can be safely left until later.

• Agreeable
All of the decision makers in your firm, including the key people who you need to implement the new project, must be committed before plowing ahead.

• Allocated
Once you have obtained that wall-to-wall consensus, responsibility has to be divvied up and “owned” by the people implementing the project to ensure that everyone takes charge of their share of the project.

As Dr. Hillson says: “Every business or project has a large number of different stakeholders who can either generate risk or help us to address it. We need to know who is in our stakeholder network and understand how they might affect what we are trying to achieve.”

There are times when after crunching all the numbers and weighing all the pros and cons, that you may decide that a certain deal, or new opportunity is not the right fit for your firm. If so, you should pass, because you want to avoid tackling projects that will just end up draining your company’s resources, both monetary and manpower.

But by measuring your risk in advance and engaging your team members, you have that ‘good chance for advancement or progress’ that Mulally brought to Ford.

The rewards can well outweigh the risks.

This Week’s Bottom Line Action Step: Avoid risk, not opportunity.

Yitzchok Saftlas

Yitzchok Saftlas is the CEO of Bottom Line Marketing Group, a premier marketing agency recognized for its goal-oriented branding, sales, and recruitment and fundraising techniques. Serving corporate, non-profit and political clientele, Bottom Line's notable clients include: Beth Medrash Govoha, Dirshu and TeachNYS. He can be reached at

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