Proactive risk management – expanding your ‘circle of control’

The first of the 7 Habits recommended by Dr Stephen R Covey in his classic self-development reference is to be proactive.

“Anytime we think the problem is ‘out there,’ that thought is the problem. We empower what’s out there to control us…The proactive approach is to change from the inside out: to be different, and by being different, to effect positive change in what’s out there.”

The 7 Habits of Highly Effective People

While Dr Covey was targeting individuals in framing his advice, many have also recognised the relevance of the recommended habits for effective boards.

When an organisation is faced with multiple threats and risks, and especially where these are rated ‘high likelihood with severe consequences’, some boards wait for an external authority to tell them what to do, or for further developments to offer greater certainty. The nautical maxims quoted in the header image echo Dr Covey’s advice, and each of them also reminds us of Epictetus’ sage counsel:

“We cannot choose our external circumstances, but we can always choose how we respond to them.”

Being proactive of course means choosing to imagine consequences before they unfold, and taking precautionary and mitigation measures to prevent or limit damage. That’s what risk management is all about.

Dr Covey’s advice drew attention to what he termed our ‘circle of control’ and our ‘circle of influence’ embedded within our ‘circle of concern’, shown schematically below.

Depending on their structures, resources, environments and other defining features, NFP organisations have both shared and unique concerns, and varying degrees of influence or control over circumstances within their circles of concern. NFP boards have a responsibility to heed the advice to be proactive in identification of their risks, assessing them, and developing preventive, mitigation and response measures via policies, plans, and assignment of specific responsibilities for immediate action as required.

By taking effective risk management steps, organisations increase their circle of control. This is a definition of good governance – maintaining a system of effective controls,

Knowing how to respond beforehand means you won’t lose valuable time casting about for what to do when ‘navigating the storm’. Instead of reacting in panic, your team will respond in a measured and focused way, that is likely to offer greater protection for your people, assets and operations.

Leave a Reply