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ISO Certification - Managing Risks Part 2
Episode 14 ISO Certification – Managing Risks Part 2
ISO Certification – Managing Risks Part 2
In this episode of “The Quality Hub,” Xavier Francis continues his interview with Scott Dawson, president of Core Business Solutions, about managing risks in business. They discuss the importance of prioritizing risks and introduce the use of a risk matrix for analysis. They emphasize the need for proactive risk management and creating a risk-aware culture within the organization.
Hello everyone, and welcome to the Quality Hub, chatting with ISO experts. I’m your host, and I’m here with Scott Dawson, president of Core Business Solutions. So glad you could be here with us again, Scott.
Well, it’s my pleasure.
Today’s episode is Risky Business Part Two, where we’ll be continuing our conversation with Scott from last week’s podcast.
Scott will show us how to prioritize and address risks and also discuss the frequency of reviewing risks. So, Scott, last week we talked about what risks are from a business point of view, why we need to manage them, and also about internal and external risks. Today, Let’s start with how you go about prioritizing these risks.
Boy, you could you could just get yourself twisted up in a knot thinking about all the things that could go wrong.
Yeah. Sleeping at night exactly happened because there are so many things to think about.
So you want to boil it down to, I guess, analyze which of those risks we should pay attention to, which of those we should spend time on, which of those we should spend money on. Perhaps because you can’t mitigate everything. I mean, you’re in business, you get out of bed in the morning, you’re taking risk.
Yeah, right.
And so life is just full of risk. So you’ve got to prioritize. And in a business context, some tools can be used. So one of the tools you can use to prioritize risk is called a risk matrix.
Okay. So it’s not like the one with all the numbers and zeroes not coming down.
Yeah, that’s a good movie. Yeah, good movie. And I suppose you could use it for risk, you know, analogy. But how do you dream up all those kinds of problems that guy had that day?
Yeah, how about it?
But a risk matrix would be a document or a spreadsheet in which you’d list out internal factors you’re concerned about or external problems that could occur.
So a brainstorming kind of a thing. And then you rate each of those issues in two regards. One is the impact or the potential impact on your business. The second is called likelihood or the chance it could occur. So to illustrate. So let’s say there’s a potential problem that could devastate the company, could put you out of business.
So you’d rate that with a high impact. But the chances of it occurring are so remote that you would perhaps have a low likelihood. So the combination that, yes, it could be devastating, but the chances are so slim that we’re just going to kind of keep our eyes on it and not do anything.
Yeah, like if you’re if you’re building got destroyed. But you’re not in Tornado Alley and you’re not where there’s a lot of hurricanes. So. Yeah, that would kill you. But yeah, it’s not likely to happen.
But in the same regard, something could have a high impact and its likelihood is high. You want to do something about it.
Now flip that around. If the impact would be, I don’t know, a bump in the road or might take an extra couple of hours to get something resolved and it’s kind of can be dealt with in the normal course of business. So the impact will allow it might have a fairly high likelihood, you know, may in fact, maybe it recurs regularly.
So how much money would you want to spend on it? I guess it kind of depends on what else is competing for your money.
Right? Sort of like, let’s say you have a machine and the machine needs to be maintained every 5 hours. But another one of those machines is, you know, a whole month’s worth of income, gross income.
You deal with it being maintenance for 10 minutes every 5 hours.
Yeah. So high likelihood, really high impact are going to be urgent. You’re going to want to focus on those things. Certainly, when you talk about safety in a manufacturing environment, you’re going to find things in your operation that could create severe injury. Or worse.
And the chances of something happening are pretty high. So you’re going to want to be very, very careful. Let’s say you have a new chemical that you need to use in your manufacturing process. Highly toxic chemical. Who are you going to let have access to it? What kind of training do you want to provide for somebody to handle it properly?
Where are you going to keep it when it’s not in use? What would you do if it were to spill? And how would you deal with that?
And who. Who’s in charge of dealing with it? All of those things.
Yeah. There’s an example that you want to take. You want to take action. And then if either impact or likelihood were fairly low or both were fairly low, you’d probably put it on the back burner.
Yeah. You wouldn’t be as much of a priority. Well, again, this is a great way to look at how you prioritize them. How often do you review these? You know, there’s there’s a multitude of risks. Are they different based on what that risk might be?
I think it depends on the business and the scope of risk you’re dealing with.
So if you’re talking about severe business risk, you’re probably dealing with it at a senior management level.
You’re probably reviewing that monthly or quarterly in regular business meetings. You may have a more formal process in your management review if you’re an ISO 9001-certified company, for example.
Well, you do have to deal with risk, you have to show how you’re doing it, but the frequency is up to you.
If it’s more of a department-level type thing, it might be done more frequently with different people at a different, I guess, different level in that regard. Fortunately, ISO doesn’t dictate how to do it or how often to do it, but you want to have a routine to deal with a risk. Not that you always wait for that meeting to deal with it.
Well, like you said, some things are more frequent if it’s on the shop floor. That’s a common thing that you learn how to mitigate from a supervisor position versus upper management.
Yeah, Yeah, very, very much so. And so what all of this does is it creates a mindset within the business of being proactive. It helps you to make decisions that are more long-term or forward-looking.
ISO calls that risk-based thinking. It means thinking about risks and problems before they happen. And incorporate that into your practices, incorporating that really into your culture.
Right. Right. So it’s not a reactionary thing?
For sure.
All right. So any ideas of what an action plan might be that you might implement to address these risks?
Well, if you don’t take any action, then you’re not doing anything right.
So you chose not to do I chose not to do anything.
You chose not to do anything. And sometimes that’s the right thing to do. Keep your eyes open. Review it again. Maybe have a report out from someone at a later date. But you may say it’s not that urgent that we deal with it so we are going to leave it on the back burner.
But in other cases, actions need to be developed and assigned. Could be that they’re fairly urgent to get done. Sometimes they require a budget. Sometimes you’re putting contingency plans in place. So what would we do if this were to occur? You know, think about back to that hazardous chemical in your shop. What would we do if a spill were to occur in the work area? How would we deal with it?
Yeah. Planning that out and then documenting what your actions are.
You are assigning individuals to take care of them. Having due dates is just normal, you know, action out of management in that regard. But if you’ve determined these are important to your business, if the risks are important, the action should be important as well.
Yeah. Some things you might just look at once a year. Like, you know, broad economic changes and things like that. You don’t need to look at it every day because you can’t do anything about it every day. But you don’t want to ignore it altogether either.
Exactly right.
Yeah, for sure. And the budget is always a factor. Resources are always a factor and that sometimes comes to bear on what is realistic in terms of what you can do about things. So you may need a short-term plan that maybe isn’t so resource-intensive just to make sure the worst doesn’t happen.
Yeah. Exactly.
Well, I’d say anyone in business is dealing with risk anyway. You’re used to it. It’s like you’re used to the temperature of the water. It doesn’t shock you to get in. Oh, this is so cold. Well, no, it just. It’s just what it is. But I think raising awareness that we can be proactive is a key aspect of this.
Right. And at that, at all levels of the organization. And then secondly, identifying those and giving opportunity for people to bring those ideas out. So it’s one thing for someone to see something, but they don’t say something. So you kind of want both the seeing and the saying so that you can at least discuss whether it’s important enough to deal with right away.
Yeah, exactly right. So, you know, getting people together to discuss, having brainstorming sessions, perhaps doing an audit or an assessment or a walk-through of a process or a work area to look for hazards, things like that, you know, creating it, making it part of the routine of the business that you’re looking for potential risks and then assessing the risk to see what the severity and likelihood are.
Yeah. Exactly.
Well, this is just fantastic advice, Scott. I cannot tell you how much I appreciate you being here today and sharing this. I know it is kind of one of your passions.
Well, it’s my pleasure. I think by just slowing down for a few minutes, as we did today, and thinking it through, I think everyone should relate to the need to manage risk more effectively now, and maybe be a little bit more aware of how we might be able to manage it more effectively as well.
Absolutely. And how important it is to your business. Thank you so much. And thank you all for listening today. We appreciate you tuning in. And if you haven’t already, please subscribe to our podcast on your favorite podcast platform. That way, you won’t miss any of our upcoming episodes of The Quality Hub. Have a great day, everyone.