“It’s really all about trying to understand the ‘what if’ scenarios,” says Pamela Barrett. “Any organisation that is operating internationally will operate in a field where there is significantly more risk to navigate.”
But what kind of risk are we talking about? How much risk are we prepared to take on? And how can we anticipate and manage risk effectively?
These are some of the questions that Ms Barrett, Director of the international education consultancy Barton Carlyle confronts in her work with education clients around the world. The same questions anchored a special seminar on risk management that she conducted at the ICEF Berlin Workshop last fall, and we sat down with Ms Barrett in Berlin for some of her insights on the critical business of managing risk.
We are pleased to present two video excerpts from our conversation below, along with an embedded version of her seminar presentation.
The nature of the thing
In simple terms, risk is uncertainty. It describes the things that might happen or the outcomes that might occur – some of which we can influence and some of which we can’t. In its broadest terms, as Siemens’ Dr Georg Klein has said of strategic risk in particular, it is “everything, every obstacle, every issue that has the potential to materially affect the achievement of our strategic objectives.”
How then to begin making sense of such a broad conceptualisation of uncertainty? Ms Barrett advises that any proper understanding of risk begins with an honest assessment of an organisation or enterprise’s risk tolerance and then an equally clear-eyed consideration of its activities in relation to that appetite for risk.
She expands on this point in the first of our two video clips below, and begins to illustrate how organisations and institutions can better map and manage risk.
The wisdom to know the difference
In her Berlin seminar, Ms Barrett was careful to define different categories of uncertainty: market risk, portfolio risk, and strategic risk.
Market risk refers to uncertainty in the operating environment. This includes such factors as economic, social, and political risk, and, in an international education context, underscores the important impacts of regulatory change, demographic trends, or economic crises. While it is not possible to control market risk factors, Ms Barrett makes the point that organisations can reduce their exposure by investing in market research and otherwise gathering good market intelligence to inform management decision-making. “The biggest risk factor,” she says, “is not understanding the markets in which we are operating. It’s a false economy in my view to spend resources on going out to markets before we really try to understand them.”
Portfolio risk, on the other hand, describes uncertainty that arises from the business model itself, including the organisation or institution’s capabilities, programmes and services, use of technology, and competitive strategy. The organisation has more control over this level of risk as it can decide what markets or business segments to enter or exit, and it has discretion over its service offerings and other aspects of operations.
Finally, strategic risk refers more to uncertainty at an industrial scale – for example, changing competitive forces, technological change, or shifts in consumer preferences. This too is beyond the influence of individual organisations or institutions, but such uncertainty can be addressed to one degree or another by greater collaboration at the industry level.
Ms Barrett advocates for an active approach to these different levels of uncertainty and for integrating risk management into ongoing planning. In the following video clip, she talks about some of the tools of risk management, such as SWOT analysis and scenario planning. “Nobody can plan for the catastrophic currency crash or natural disaster,” she points out. “But we can imagine how we would respond.”
For more on scenario planning, including a step-by-step process for building and analysing future scenarios, please see our earlier post on the subject.
In summary, Ms Barrett offers some highlights in developing a risk management strategy, such as:
- Understand your institution’s risk appetite;
- Map your risk profile;
- Develop your risk register;
- Incorporate risk assessment in your international strategy;
- Use scenario planning to inform risk management;
- Mitigate risk using market research for an active market intelligence programme.
For more on the risk management techniques and tools introduced in Ms Barrett’s seminar, please see her presentation deck below. It provides straightforward advice and ideas for organisations of any size, as Ms Barrett points out: “Everybody should have a risk management strategy – it’s not just for the big guys with the big risks.”