Facing Up To The Challenges Of Risk Communication With The C-Suite By Pedro C. Ribeiro

Introduction

Key characteristics of strong risk communication Risk management is pivotal in achieving business results, and risk communication is integral in promoting risk awareness and a clear understanding of risk. However, to successfully achieve this objective, risk managers must overcome the barriers to risk communication, especially when communicating to the executive suite. This article will explore some of the key characteristics of powerful risk communication as well as approaches to overcome risk communication barriers with executives and decision-makers.

Key characteristics of strong risk communication

Before looking at barriers to risk communication and ways to handle these challenges, risk managers must keep in mind some vital characteristics of risk communication that set it apart from other types of communication when crafting messages to decision-makers. Risk communication: 

• Involves communicating uncertainty about the future and its impacts on the decision-maker’s objectives and agendas.
• May trigger varied emotional responses and psychological defense mechanisms. Research shows that emotional reactions to risk often diverge from analytical assessments of those risks.
• Conveys messages based on probability concepts and techniques to an audience with different risk perceptions, tolerances, and understandings of risk and its assessment techniques. 

Barriers to risk communication

Barriers to communicating risk to decision-makers may arise from many sources: 

1. Human psychological aversion to uncertainty and bad news.

Humans dislike uncertainty. The brain evolved to be uncertainty averse. We tend to underestimate the probability of negative events, overestimate the probability of positive events, and ignore or distort information that we perceive as bad news. For example, Dan Lovallo and Nobel Prize winner Daniel Kahneman indicate that executives are more susceptible to leaning towards optimism, underestimating potential risks, and overestimating positive outcomes. As a result, according to the authors, executives selectively seek or interpret information that aligns with their existing beliefs and goals, minimizing or ignoring contradictory evidence and bad news. 

For example, Lehman Brothers’s CEO Dick Fuld repeatedly ignored risk management warnings and advice from Lehman’s Chief Risk Office (CRO), Madelyn Antoncic. In 2007, Fuld replaced Antoncic, an award-winning risk manager, with a CEO-friendly CRO with no formal risk management training. Lehman collapsed in 2008. 

2. Pressure for results.

Decision-makers are frequently under pressure for short-term results, severe time constraints, and conflicting priorities dictated by personal, organizational, and political agendas. Henry Kissinger’s famous quote in The New York Times mirrors a thought shared by many executives. “There cannot be a crisis next week. My schedule is already full”. Compression of decision time, competitive pressures, and overemphasis on short-term results may lead executives to disregard critical aspects of risk management, creating strong barriers to risk communication. For instance, Boeing’s executives, driven by the need to compete with Airbus and boost profits, rushed the development of the Boeing 737 MAX 8. Despite warnings from inside the company, top management cut corners in quality and safety features to meet financial and time to market targets, leading to fatal crashes in 2018 and 2019 and to the largest financial and reputation loss in Boeing’s history. 

3. Excessive use of technical jargon.

Excessive use of technical jargon, as well as a lack of basic communication skills, can be a self-imposed communication barrier. Communicating risk without first translating risk technical jargon into accessible language for the audience is the shortest path to creating boredom, confusion, or denial.

4. Organizational culture.

All organizations have a culture – however, not all are supportive of risk communication. Executives set the tone by which individuals and teams are expected to behave regarding risks. Despite the known benefits of positive thinking, a leader who overemphasizes positive thinking minimizes risk awareness and discourages his subordinates from talking about risk, creating a team atmosphere low on psychological safety. They can also create a “Cassandra culture” – an environment in which people are reluctant to discuss the potential downside of opportunities and report risks upward, at least not without sugar-coating the message first, causing warnings to go unheeded.  

According to the Fukushima Nuclear Accident Independent Investigation Commission (NAIIC), the fundamental causes of the accident at the power plant on March 11, 2011, are to be found, among others, in cultural factors of Japan such as reluctance to question top management’s views and authority.  

Overcoming barriers to risk communication

Following are tips and reminders that can help overcome communication barriers. 

1. Be frank, open, and prepared. 

Trust and credibility are your most important assets when communicating risk information. If you lose trust and credibility, you will find them almost impossible to regain. In addition to technical skills, professional and ethical conduct, do your homework. Organize a “what if” brainstorming session. Come up with potential questions and effective responses that address the concerns of decision-makers. 

2. Know your audience and the organization’s culture. 

Listen and understand the decision maker’s mindset, concerns, agendas, and objectives. Listen actively to their questions. Make sure that your message also addresses their priorities. This not only shows respect but also allows you to focus on their specific worries effectively. 

3. Address emotional concerns.

Risk involves emotions. Acknowledge the emotional aspect of decision-making, empathizing with concerns, risks, and uncertainties. Successful risk communicators must understand how the audience perceives and feels about risk. Considering the human side of risk can help break down walls and establish rapport. Creating an emotional connection fosters a sense of shared understanding and helps to build trust. 

4. Speak and communicate clearly.

Do not try to impress executives with excessive risk jargon. Use plain language and clear visuals. Visual aids convey information more intuitively, making it easier to grasp the nuances of the opportunities and threats involved and their impacts. Prioritize key information, allowing executives to focus on the most critical aspects. 

5. Offer a balanced perspective. 

Acknowledge that addressing potential risks is not about dwelling on negativity but rather about ensuring a well-rounded understanding that enables better decisions. Balance the presentation of downside risks with opportunities. Most importantly, show how your risk assessment may prevent a potential crisis and increase the odds of goal achievement.

BOX 1: Bridging Risk Perception Gaps in C-Level Meetings

In C-level meetings, two or more participants may have differing, sometimes conflicting risk perceptions about a topic under discussion. For example, the CEO may view his new pet project as a walk in the park, while the CFO may perceive it as a crisis waiting to happen.

In this situation, the risk professional or CRO must acknowledge both perspectives and facilitate an objective discussion, asking questions that explore each perspective, clarify assumptions, identify risks and opportunities, and leverage strengths from both viewpoints. For instance, asking attendees to elaborate on the specific reasons they perceive the project to be high or low risk, the top risks or opportunities they see, how likely they are to occur, and their potential impacts on the organization will help to build a shared understanding that balances optimism and caution.

Conclusion

Risk management has a pivotal role in achieving business results, but without proper risk communication it is all in vain. By recognizing and understanding the various risk communication barriers, risk management professionals can more effectively convey critical risk information to executives. This means acknowledging the emotional aspect of decision-making, empathizing with concerns, and fostering a sense of shared understanding and trust. It means risk managers need to step outside their analytical personas to consider the human side of risk and establish rapport.

Beyond just delivering a more nuanced message, risk managers also need to listen, understand the organization’s risk culture and how executives perceive risk. Showing how your risk assessment may prevent a potential crisis, identify opportunities or support the achievement of the decision-maker’s goals helps promote a constructive dialogue.

Author

Pedro C. Ribeiro 

Pedro is a consultant, author, professor and speaker at events in South America, Europe, Africa, and North America, including at NASA events. A former executive and business unit director in global banking, information technology, and consulting sectors, he holds an M.B.A. from the Wharton School, University of Pennsylvania, with specializations at the Harvard Business School and at the Massachusetts Institute of Technology. Pedro is the founder of Stratech|RiskPerceptions and a guest senior lecturer in Uncertainty and Risk Analysis at the F.I.A. Business School Executive Education and M.B.A. Programs in São Paulo, Brazil.

Peer-reviewed by 

Carl Densem 

References

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9. McFadden, C., Schecter, A., Monahan, K., and Schapiro, R. (December 9, 2019). Former Boeing manager says he warned company of problems prior to 737 crashes. N.B.C. News. https://www.nbcnews.com/news/us-news/former-boeingmanager-says-he-warned-company-problems-prior-737-n1098536 11. The Institute of Risk Management. (October 15, 2012). Risk culture: Under the Microscope Guidance for Boards. https:// www.theirm.org/media/4703/risk_culture_a5_web15_oct_2012.pdf 
10. Edmondson, Amy C. (2018). The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth. Wiley.
11. The National Diet of Japan. (2012). The Official Report of the Fukushima Nuclear Accident Independent Investigation Commission. https://www.nirs.org/wp-content/uploads/fukushima/naiic_report.pdf

Aprofunde-se mais sobre o assunto no webinar realizado no canal do YouTube da FIA Business School, juntamente com o Professor Pedro C. Ribeiro, sobre os Segredos da Liderança e Comunicação para Prevenir Crises em Projetos. Clique aqui e assista. Bons estudos!