Risk management and innovation go hand in hand – and I know that statement might be surprising to some of you. But according to Steve Culp and Wouter Koetzier, risk management and innovation are partners, not adversaries. The two, when used together intelligently, can lead to identification of missed opportunities and caution when pursuing uncharted waters. Consider this: venture capital firms often engage in risk-laden opportunities knowing that many will fail. The failure isn’t considered a failure for the business, however, if even only a few of these opportunities bear a desired result. It’s the balance between risk and innovation that makes for a successful business – and it’s thinking like that which can propel IT into becoming a strategic advantage for any business. IT has the ability – and has had the ability – to help business understand what risks are out in the world. With this skill, IT can help drive innovation by showing the business what dangerous possibilities and worth-while challenges exist, allowing the company to continually innovate without ignoring the danger signs. The article list three key principles which make for a better balance of innovation and risk management. These include flexibility, speed, and control. Control is perhaps the best fit for IT, as the pragmatic manner of risk management makes an IT organization the natural choice to man the helm:
Venture capital firms use controls, but these controls typically are designed to increase risk tolerance, fostering a culture that embraces the logic of intelligent mistakes. Innovative companies often create a safe ground for experiments, “safe” because risks are controlled, managed and measured. This typically entails bringing together the finance and operating sides of the business. To the finance side, risk is often something to avoid or mitigate, while operations often sees risk as inherent and necessary for growth. Effective risk governance can bridge these two viewpoints, translating strategic challenges into specific risks to take and providing rules, parameters and measurements to guide both the investments and the process.
The need for innovation cannot be over-expressed, nor the need for the control provided by risk management. It’s the balance between the two which will make or break business, and it’s IT’s job to help provide that balance.