December 31, 2009
Risk Knowledge Management in our time
Risk Knowledge Management in our time
Today I have some additional points to continue with the introduction of the concept of Risk Knowledge Management (RKM). Knowledge Management (KM) has various different definitions from scholars and practitioners, some of the main ideas are related to the management of intangible assets in order to improve the sustainable competitive advantages of the organization; however, I will include in this note only the concept of using our experience to build competences and to take strategic and tactical actions for a better organization, this means toward creating value. Knowledge and risk are related, at least, from the capacity that knowledge has to reduce uncertainty and when a risk has to be analyzed new knowledge is created. However, the question that probably is the most important to answer these days is how we can build a better future based on our experience.
One experience that we have had for many years is that there have been economical crises in different levels from organizations to society as a whole. But what about our capacity to manage the learning and knowledge gained from these crises, is this enough? We have had crises in countries with 2 and 3 digit inflation and the countries have recovered, We have had difficulties in organizations for years some of them have recovered others not. I mentioned in my blog 2, some of the issues: growth in American Express, Bankers Trust because of communication, Barings because of controls etc, or in general because there were not good early warning systems or prediction models or probably the most important a weak coordination of work across the organization.
When the crisis is around the world an idea that is coming up is that possibly an organization that is suffering some difficulties internally might be a common denominator for many so the effect of a failure can create higher difficulties at a higher scale. It is easy to blame models or many resources that are simply mute. This is not a good way to practice risk knowledge management; we should have a systematic approach to review what has been good and what has been wrong not from the perspective of criticizing but from the perspective of building better capabilities for the organization. The issue is that possibly the “management “ is what really is failing. For instance, how good and evolved is our preparation for integration of information systems, how good is our preparation to encourage and to support interdisciplinary and interdepartmental work in an organization and (probably more difficult) inter-industrial or inter-society work.
There are points of reflection related to the capacity for work coordination, communication with stakeholders, capacity to discuss and to analyze assumptions, capacity to develop means to accept that truth is not coming from a single person but It could be more important to use collective intelligence. How good is the preparation of management to analyze the difficult truths, how difficult is it for management to be conscious and accept that we need to deal with the danger of what Pfeffer and Sutton (2006) called Hard Facts, and Half-Truths. Another interesting point is related to the idea of Operational Risk that is mainly related to humans and technology interaction. This interaction requires everyday more attention from management to use more scope economies based on using in a better way technology for creating capabilities, and not just accumulate technology by itself without a good application by people.
Risk knowledge management is about the development of the capacity for creating new value and enterprise solutions based on our Risk Management (RM) experience and the creation of enablers that are required, such as knowledge. Risk Knowledge Management enables us to develop capacity to analyze and to build solutions where many sources and different approaches to problem solving are accepted and organized.
Professor Jay Liebowitz in his book ” What they didn’t tell you about knowledge management “ indicates some steps to develop knowledge management programs that I adapted to risk knowledge management settings concentrating on how to use our risk management experience and how to deal with it for the future.
1. Tactical points. Start small, develop maps and taxonomy of risk knowledge, embed RKM in daily life, pilot tests, change management and match KM with organizational culture, use of documentation, learning, training and auditing processes where the focus is on people
2. Strategic points. Be aligned
3. Recognize and reward
4. Technology and Organizational Strategy 80% people and 20%technoloy and I add that this 20% is associated more with collaboration and data technology than just modelling or technical systems
5. Use both Bottom-up and Top-down approaches for implementing
In summary, the invitation is to develop a Risk Knowledge Management program and, philosophy and to use our experience and knowledge, tacit and explicit, working with a holistic view, following at least the 5 previous points and to use RM and KM competences for making better decisions under risk. It is important to be aware that a lot of analyses have been performed but not used. During the last century many financial crises have occurred and the analysis of their causes has left a trace in RM. Brealey and Meyers (2002) referred to the 1987 crash as a case to study where the causes have to be identified and presented different views about these causes that included some lessons to learn: markets do not have memory, it is not possible to search continuously for an extraordinary benefit and the prices were too high. However, the question is how much risk knowledge management processes such as risk knowledge sharing have improved and how the experience has been learned and used.
Equally, Nohria and Stewart wrote in 2006 that during the twentieth century management emphasized on risk and that “Uncertainty and doubt push the boundaries of management as we know it....the flight from uncertainty and ambiguity is so motivated, and the desire to reduce what is fundamentally unknowable to probabilities and risk so strong, that we often create pseudo uncertainty”. This is an open window to search and to develop the capacity to manage knowledge for risk management in the way that Bronowski said “Knowledge is an unending adventure at the edge of uncertainty” and the same time to understand that we will continue making decisions under risk and we are not good yet applying knowledge management to RM processes.
• Bronowski J http://www.finestquotes.com/author_quotes-author-Jacob%20Bronowski-page-0.htm accessed October 2009
• Liebowitz J 2006, What they didn’t tell you about knowledge management”, The Scarecrow Press Inc, Lanham Maryland
• Pfeffer J and Sutton R 2006, Hard Facts, dangerous half truths and total Nonsense Harvard Business School Publishing, Boston
• Simmons R 1999, “How Risky is Your Company”, Harvard Business Review, vol. 77, no. 3, pp 85-94
Posted by edrota at 01:50 PM
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