Why leaders need to look closely at important risks before they are forced to
“We make ourselves powerless when we choose not to know. But we give ourselves hope when we insist on looking.”
On New Year's Eve 2019, I was in an emergency evacuation centre in Bermagui, on the New South Wales south coast, wondering if my family and I would get through the night. A fire had already levelled the next town. A change of wind saved us, and the next morning we drove out to safer ground.
Bushfires had touched my life before. I remember coming out of primary school to air thick with smoke from the Ash Wednesday fires, and my uncle's house burned down on Black Saturday. Both times, though, the fire was present but ultimately didn’t directly affect me.
That night in Bermagui the reality of the threat was real and happening to us. Since then, I've thought a lot about the risks we know well but still think about as something that happens to other people or organisations.
Leaders can mistake acknowledging a risk for acting on it
In audit and risk committee meetings, I've noticed how easily leaders can confuse acknowledging a risk with doing something about it. We agree it's real, record it, and move on to more immediate problems. Months later, we may still be having the same conversation, with little more understanding of what the risk could mean for us.
Nature risk is a good example right now. The Australian Conservation Foundation has estimated that about half of Australia's economy has a moderate to very high direct dependence on nature, through things like water, pollination and healthy soil. Yet the authors of Australia's 2021 State of the Environment report rated biodiversity as poor and deteriorating.
Even so, nature risk can seem distant. An organisation might have no direct involvement in farming or forestry, yet depend on a supplier whose operations rely on reliable water supplies. A prolonged drought could eventually affect its prices, deliveries or ability to operate, and by the time the organisation feels those consequences, its options may be limited. Because nature can decline gradually, there may be no single event that forces leaders to pay attention.
And while larger organisations in Australia now have mandatory climate reporting, reporting on nature is still voluntary, so leaders are not yet forced by regulation to think about it.
Match your response to the risk
So how do leaders give a risk like this the attention it deserves? With Adaptive Stability, leaders can approach these risks with a steady mindset, recognising that what has happened elsewhere could happen to them. They can then use foresight to explore how the risk might develop, flexibility to adjust their plans as they learn more, and resilience to keep preparing even when more immediate pressures compete for attention. The aim is to make a considered decision about what deserves attention now keeping long term resilience in mind.
Three questions to support your thinking
What does our work depend on that we rarely think about? Ask your team to name the people, resources and conditions your work relies on but nobody manages day to day, such as a single key supplier, an ageing system or a natural resource like water. Which of these have you already seen fail for someone else?
How much attention does each one deserve? Ask how seriously it could affect your work, what signs would suggest it is getting closer, and how long you would need to prepare or recover. Risks with serious consequences and little time to respond deserve a closer look.
Who will follow it up, and by when? Give one person responsibility and set a date to report back, so the risk stays on the agenda after the meeting ends.
A deliberate decision is enough to start
Most leaders have a risk in their work that is a bit like bushfire was for me before Bermagui. They know it is real and have seen it affect others, but haven't looked closely at what it could mean for them. The opportunity to prepare is often greater than we realise, provided we use it while we still have choices.
Which risk have you seen affect others that you haven't yet looked at closely for your own organisation?
