Taking Risks in a VUCA World

Recently I have found myself in several conversations about global mobility risk. Due largely to geo political reasons there is a sense the economic, social and environmental landscape is becoming ever more volatile, uncertain, complex and ambiguous (“VUCA”).

For many, the stresses and pressure of the situation are relentless and overbearing, things are just getting too difficult, the challenges that require bridging just seem to be too big even for the most experienced leaders in business and society.

In my opinion, VUCA is simply one of many ways to describe the wider landscape within which business is operating. It captures a difficult, systemic truth about the state of our markets, our society and our politics.

However we describe the current landscape, most business leaders agree that everything is in a state of flux – so much so that the very idea that businesses can continue to generate revenues from a marketplace where they have built a level of competitive advantage seem to be under threat.

So, what do we do?

Perhaps the most useful strategy is not to get hung up on trying to mitigate all risks, but to focus on maximising the potential opportunities that VUCA can provide. Ensuring there is capacity to respond quickly to opportunities and to take calculated risks could offer any organisations quite a considerable advantage.

Businesses must take risks to survive. Yet all businesses must also try and mitigate those risks in order to survive.

Traditionally the approach to identifying risk has fallen to the person at the top of the pile or at very best to those sitting on the board. Yet the more diversified and devolved the process identifying risk, then the more likely it is the knowledge and understanding of which effective strategies could be implemented. This inclusive approach has the added benefit of creating spaces in which innovation around opportunities are more likely to happen.

The new goal of business strategy is to understand how to constantly evolve competitive advantage, adjusting to an increasingly dynamic and uncertain world.

Agile companies are able to confidently take more risks not only because they have more diverse, inclusive risk scanning capabilities, but because they can quickly flex if the decisions they made turn out to be wrong. They can learn from those mistakes and move forward. Risk taking then can become a learning strategy in its own right.

When strategy becomes difficult and the direction, scale and scope of change is difficult to map, it is always far to easy to just do nothing. But it is clear to me that not taking action to create an agile capability that can thrive on risk leaves companies open to falling behind their competitors.