No company can predict all the emerging risks it may face but pooling different perspectives and experience from across the company could give companies a leg up on competitors. The idea is for this gathering to game how specific risk scenarios may unfold, and pinpoint what to look out for as early indications of an inflection point.
Michael Zuraw, the senior director of global enterprise risk management (ERM) at ON Semiconductor, a $6B Fortune 500 technology company, described in detail at a recent NeuGroup Corporate ERM Group meeting his team’s approach to organizing such day-long events. Largely unstructured, they are typically populated with executives a level or two below the C-Suite and focus on a single, large unifying trend. The annual events prompt attendees to imagine two or three plausible scenarios for what issues may develop 15 or 20 years into the future as a result of these shifts.
“From a meeting coordinator standpoint, the scariest thing about these sessions is that they’re very unscripted, and we honestly don’t know where they will go,” Mr. Zuraw said of what are called Emerging Risk Scenario Planning Sessions.
The theme last year was autonomous connected vehicles, and the year before was geopolitics. This year’s meeting will explore how the future artificial-intelligence (AI) environment might in 15 years or so shape the company’s drivers of value, customers, and sales of its products.
“Then we try to work backwards … If that’s the world in 15 years, what will happen as it unfolds,” he said, adding, “Is there an inflection point, and can we put leading indicator-type ideas around that inflection point, to give warning when it may arrive?”
A company monitoring for such indicators may then pick up on the inflection point before competitors and have a clearer idea about the first steps to take to respond to the potential risk. In terms of AI, Mr. Zuraw said, one risk avenue to explore may be how the technology impacts the company’s current manufacturing process and footprint, including potential disruption to political and societal stability around the world.
Another group member said his firm is considering a similar exercise and asked whether his peer has used any “external facilitation” to prompt discussion. Zuraw responded that his team had invited the DC-based Eno Center for Transportation for the connected cars meeting, and will use an AI expert from Microsoft at this year’s event.
The Emerging Risk Scenario Planning Session themes are not simply plucked from the headlines, he said, but rather compiled in a list generated from discussions with executive management and the board of trustees. Climate change may be an upcoming theme
A stenographer provides a detailed script of the discussion and ideas generated by the cross-functional attendees, the roster of which changes each year. Then a one-page summary is provided to board members, explaining how the risk scenario progressed, the key value drivers at risk, the potential impact and opportunities, the leading indicators of an inflection point, and the two or three steps to take should those indicators emerge. A more in-depth, five- to six-page report analyzing the two or three event scenarios explored by the group is then officially filed for the record and distributed to recent and prior event participants.
“We have people who actually want to go, and having folks want to go to a day-long meeting has never happened before,” Mr. Zuraw said. “People actually enjoy it, and want to be included.”
More profoundly, the goal is to inspire executives to think more creatively about risk. The hope, he said, is that key people walk out of the room thinking about risk differently, especially those who will attend the executive strategy meeting that typically takes place soon after.
“We don’t know what we don’t know, and we probably don’t know what we think we know,” he said. “So part of this is getting used to a risk-aware culture.” Decision-making is always done in an environment of uncertainty, so risk is simply part of the equation.
Mr. Zuraw noted that when participants determine important inflection points and the steps to deal with them, at times a light bulb flashes that, in fact, it would be worthwhile taking those steps sooner rather than later – regardless of any specific future scenario.
In one minor example, he said, the Geopolitics Planning Session led to the realization that operating more “locally” everywhere the company operates is important. As a result, a community service and volunteerism program now operating in Phoenix is being rolled out across more than a half dozen countries in the coming year, and – eventually – across the company’s complete operation worldwide. “Why not just get involved because it’s a good idea anyway?” he said.