My one and only roller-coaster experience was in the 1990s when I succumbed to peer pressure and rode the iconic Coney Island Cyclone, which at that time boasted to be the third-steepest drop of any wooden coaster in the world. My friends found the ride on “Big Momma” (as it’s commonly called) exhilarating and adrenaline-inducing, while I stepped off shaking, nauseous, and determined to never again repeat the experience. Here’s why: When the ride went from thrilling to terrifying, I couldn’t slow it down; I couldn’t make it stop; I couldn’t get off. All I could do was wait it out and hope I survived. Basically, I was completely unprepared for what was happening and had zero ability to control it.
Exhilarating Or Nauseating: Your Choice
Today’s new era of business volatility is that wooden roller-coaster ride that few business leaders expected and none can stop. Wooden roller coasters are distinct in that they are bumpier, more uneven, and have that distinguishable “clickety-clack” sound purposely to induce more psychological fear. Similarly, volatility, with its massive global outages, cyberthreats, new tariffs, trade wars, divided and impatient customers, and economic concerns is taking all of us on a wild ride. This ride feels like one where we’re strapped in, unable to get off, and don’t know what’s coming next. But it doesn’t have to be that way. While you can’t control the volatility, your approach to enterprise risk management will determine whether this ride is an exhilarating experience or a nausea-inducing one.
Smooth Out Volatility With Enterprise Risk Management
While business volatility tests the boundaries of resilience, it also creates opportunities for companies to make risk management efforts more targeted and effective. To take advantage of these opportunities as well as to avoid getting caught off guard with everything, all business leaders must understand risk to chart the best course of action. My new report, Regain Control Over Business Risk With The Three E’s Framework, provides a foundation for identifying what is controllable and how to be smart when dealing with volatility. To identify the three sources of risk, model scenarios, and create mitigation plans, recognize that:
Enterprise risks are where you have full control. Companies have the greatest level of control within the walls of their own enterprise. Risks that arise from your company’s strategy, investments, business model, products, policies, internal controls, and even the maturity of your enterprise risk management program are fully within your control to address. Luna Park, the amusement park that operates the Coney Island Cyclone, is directly across from the beach but requires all park guests to wear shoes and shirts on all rides for health and safety reasons. Ensuring that rides are maintained, the park is safe and hazard free, and they have the right policies to keep guests safe and happy are risks within the park’s control.
Ecosystem risks are where you have partial control. When it comes to your ecosystem, your company is fully responsible for risks, disruptions, and failures that arise from third-party relationships; however, you only have partial control over how they manage their risk or adhere to regulations and practices that will ultimately impact you. Amusement parks, even the theme park giants, don’t build their own rides. Instead, they rely on third-party firms with engineering expertise, and knowledge of safety best practices, to bring their vision to life. Unfortunately, when an accident or injury occurs, it’s the park that’s held responsible, as rising litigation against park operators can attest.
External risks are where you have no control but can prepare a response. External forces of systemic risks build slowly, materialize quickly, and cause a cascade of adjacent failures for companies and their ecosystems. You can’t prevent tariffs, technology bans, pandemics, and wars, but you can identify, assess, and mitigate them. Amusement parks are highly sensitive to external forces such as weather. Wet and slippery surfaces, gusty winds, and lightning strikes increase the risk of accidents and threaten the safety of guests and employees. Although park operators have no control over the weather, they must have response strategies such as policies for how quickly to close, how quickly to reopen, and under what circumstances they’ll stop a ride or close the park.
With no end in sight to the stream of critical events, profound changes, and global disruptions, yesterday’s approach to risk management can quickly become insufficient. Leverage the Forrester Three E’s Framework to target risk management efforts at the risks that are most consequential to your business and that will provide the greatest reward.
Read the full report for more detail on the Three E’s Framework, and schedule an inquiry or guidance session with me for further insights.
