Key message: Risk is a term often confused when translated. SWOT and risk both focus on the positives and negatives.
In an earlier article I introduced the concept that risk practitioners, professionals and academics should move away from using the term Risk and replace this with Threats & Opportunities. Introducing this concept was a deliberate attempt on my part to move our thinkers and creators away from focusing on the term Risk. It is my contention that, rather than perpetuate another management term and process, simply build upon what already exists.
Most managers are quite familiar with the SWOT analysis (management 101) and aligning risk to this well respected and practiced technique would assist many others to better understand the importance and value of what is trying to be achieved through risk management and at the same time simply the message we are trying to sell in the developing world. I put forward the idea that we should replace SWOT analysis and risk management and combine them to become SWOT Management (SWOTM). We can now use the best of both worlds and it is a natural fit. Let me explain.
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Note the following extract from Wikipedia:
“SWOT analysis is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture”. A SWOT analysis can be carried out for a product, place, industry or person”.
I would argue this could be extended to any idea, decision or activity. For those of us operating in the risk management space does this not resonate with us?
Further,: Wikipedia states
“It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective”.
Wikipedia also states the “SWOT analysis aims to identify the key internal and external factors seen as important to achieving an objective. SWOT analysis groups key pieces of information into two main categories:
1. internal factors – the strengths and weaknesses internal to the organization
2. external factors – the opportunities and threats presented by the environment external to the organization”
Let us now review what is prescribed on the risk management side. ISO 31000 makes it quite clear when describing the term risk management:
“a set of coordinated activities to direct and control an organisation with regard to risk” and where risk is described as “the effect of uncertainty on objectives, where an effect is a deviation from the expected either positive or negative”.
Two of the major steps within the risk management process include the following:
· Establish the context – within this step factors and considerations include: an analysis of the external and internal context, the risk management context, developing the criteria to be used for the risk assessment and the creation of a Risk Breakdown Structure.
· Risk Identification – within this step we now identify and describe risk events (threats and opportunities) so they can be analysed and treated further on in the process.
For us mere mortals and on the frontline of risk management that it is still a hard sell, particularly, when human nature associates risk with negative events and management are already familiar with SWOT and have been for far longer (in the 1960’s and 70’s) than risk management has been formally recognised (approx 1996 when the first AS/NZS standard was published).
I say, save the angst and focus on what is true risk management and that is simply the maximising of opportunities and the minimising of threats.
So I would argue that both SWOT Analysis and Risk Management are well aligned philosophically as well as in thought, word and practice.Jump on the new train called SWOTM.