Creation of a comprehensive management instrument that incorporates a client's current risk control activities for corporate objectives while integrating all other elements required for systematic management of corporate risk and cost-effective reduction of loss potential.
Client Management Concerns and Needs
Many organizations within a corporation have become established and adopted as indigenous elements of the management infrastructure in response to social, cultural, or moral issues. A family of concerns emanating from those issues has arisen over a long period of time and now is permanently embedded in most companies or agencies. It consists of a variety of specialized activities -- each devoted to meeting the demands of an underlying issue. Most of these specialties focus on some aspect of risk. Examples include safety, security, quality assurance, environmental control, human resources, legal counsel, public relations, occupational health, and loss financing. At their initiation, each function was intended to address an aspect of corporate life that historically had been overlooked or ignored but which subsequently became considered essential for corporate survival. Ironically however, not one of those staff functions has ever been able to financially justify its existence in the same manner as typical mainline corporate functions like engineering, facilities, or manufacturing. Why? Because their budgets are devoid of a deliverable. They are dealing in only two dimensions – cost and schedule – whereas line organizations must provide top executives with a third dimension – performance. Therefore, executives are caught in a dilemma: while they cannot measure the value of risk functions, they cannot eliminate them -- due to the public reaction that would result. Further, there is no rational basis for allocating resources to any of these two-dimensional organizations. They are "money sinks" with no upper or lower limits to govern them.
Work Required to Satisfy Concerns
Whatever managers manage, they do so on a 3-legged stool. Those legs are performance, cost, and schedule. So, every corporate function being performed to manage some aspect of risk must be elevated from a moralistic (2-dimensional) status to a management (3-dimensional) one. The means for accomplishing that critical conversion is a System Risk Strategy (SRS). The heart of the SRS is a moral argument: No one should be injured or killed nor should facilities, materiel, or reputation be damaged or destroyed. The SRS is a straightforward document consisting of specific tasks that are DEFINED (performance), MAN LOADED (cost) and CALENDARED (schedule). Those tasks become then the corporate resources needed to identify, evaluate, control, finance, and administer corporate risks.
In summary, the SRS:
- Lists all the specific tasks that must be performed to answer the moral argument.
- Describes each task in sufficient detail that the average person can clearly understand its nature.
- Allocates manpower for each task in terms of both calendar time and level of effort.
- Describes the organizational relationships between those who must assure risk control and the decision makers in line management who actually control risk.
- Stipulates how differences in opinion between the types of managers in point 4 are resolved.
Once this remarkable reform is complete, risk can be managed for the first time.