Distinguishing between risk and issue

The ability to distinguish between risks and issues is one of the most fundamental skills a manager needs in order to effectively manage their business.

Why is it so critical? Quite simply, the ability to handle each is quite different and focusing on one without the other will ultimately lead to your business not being successful. You see it. Think about those businesses that just seem to move from issue to issue, and never really seem to get on top of anything. In the end these businesses will at a minimum experience a larger cost base as to manage issues requires more people, and in some cases ultimately results in the business failing.

So how do you determine what is an issue and what is a risk? The picture we have used here gives you a major hint. A risk is something that you ask questions about, questions to determine the impact and likelihood of that risk, and then the controls that are required to manage that risk. An issue is something that makes you “jump”, and generally jump into some form of action. Hence the exclamation mark.

Once you have distinguished between a risk and an issue, then you need to consider what type of response you will take for each. The majority of people will focus in on the issues, quite simply because these are more easy to identify (as everyone is generally either talking about it – both internally and externally, or people are secretive about it). However, issues can “suck the life” out of your people and your business if they become the sole focus of your organisation. You see it so often. An issue occurs and everyone places their attention on the issue, even if it is minor, then a few moments later there is another issue, which everyone then focuses on and in some instances the first issue is forgotten. Another trait of an organisation that is issue focused is it has a short corporate memory – that is, no one remembers the issue of a short time ago.

For me, this is not an effective way to manage a business. It is life draining, and although it may have a lot of adrenalin rushes, which is exciting, it is not sustainable for people.

For those organisations that focus on the risks, or the question marks. Then they are able to look towards the events of tomorrow, and not the events of yesterday, and although they will never totally eliminate issues, they will be much better prepared and may even be able to more effectively manage issues. Being risk focused, provides management with a lense that is more powerful to employees, is less energy sapping and provides employees with a view of the future for the risks they are taking.

For me, looking at that picture, I am most comfortable focusing on the “?” mark. What about you?


Scott North has extensive experience in enterprise risk management, internal audit, operational risk and compliance, risk strategy, scenario planning, technology risk, technology business analysis, systems design, financial accounting, and management accounting. Scott is a Fellow of the Australian Institute of Chartered Accountants with a Masters Degree from the University of Melbourne in Business and Information Technology. Scott is also a Fellow of the University of Melbourne.

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