13 July 2013

Risk Parity: Ideal Organizational Design...

Organizations across the globe are operating each day with Operational Risks.  As a result, management is doing their best to implement a combination of Operational Risk Management (ORM) capabilities.

The strategy is to manage risk to the enterprise through a series of controls and modification of human behavior.  Is it possible to create the most ideal organization from the start?  Could you design it with the lowest possible Operational Risk exposure at every physical, process, virtual and human component?

What do we mean by this?  Lets play a game.  Or more importantly, lets imagine a workplace exercise to design the ideal professional services organization in one hour:
This organization will be in the private sector.  The fictitious name for the organization is "Improvise, Inc."  All of the legal entities have been created and it is registered as a U.S. Delaware company.   It will have the following characteristics, capabilities, assets and purpose:
  • 200 humans with advanced education between 25 and 65 years old.  50% Men & 50% Women
  • Global reach of professional services. (It sells intellectual capital and information)
  • Office hubs are physically located across four locations:  Denver, Zurich, Abu Dhabi, and Singapore.
  • Language expertise includes English, German, French, Italian, Arabic and Mandarin. 
  • Subject Matter Expertise of the Improvise associates is diversified.  The core staff devoted to operational administrative processes is also diversified by physical location, 4 people each.  Therefore, less than 10% core overhead. 
Improvise, Inc. generates revenues by selling information, advisory services and subject matter expertise.  The diversity of it's 200 humans and their Intellectual Capital provides professional services to Fortune Global 500 companies.
Now, to start the exercise you will have one hour to design the ideal mosaic of people, processes, systems and external factors to operate Improvise, Inc. on a daily basis.  Begin.
How would you begin designing the ideal organization?  Will you have a headquarters location? Will the offices have four leased corporate offices or utilize a virtual / shared space model?  What will the facilities layout be with single offices, cubicles, conference rooms?  Would you start with human resources and the hiring and selection process?  What kind of systems and tools would you procure to issue to your new associates?  How would you communicate and what vendor/providers will Improvise use outside its core?  What organizational "Rule-sets" will be established?

Who will govern and what roles of power and influence will these employee-owners (Associates) have to make decisions for the good of Improvise?  What countries across the globe will you dispatch your associates to do their work?  How will you keep them safe and secure where and how they travel?  What vendors and service providers will you contract with to provide digital communications and store your valuable intellectual property?

Will you locate your Associates across the four locations equally?  Since you have 200 split into 100 men and 100 women, will you have 25 of each or 50 people in each office?  Will they all be citizens of that native country only?  Again, we are designing the ideal organization with Operational Risk Management (ORM), as our highest priority in the design.  Is this even a valid consideration?

What about the use of digital assets?  Will your associates at Improvise use PC or Mac, both?  Microsoft or Linux-based?  Android or iOS?  Anti-virus scans daily or monthly.  VPN, yes or no.  Public or Private cloud?  Encrypt data to remote sites?  Retention and privacy policy?  What happens when an associate goes home?  When they leave the organization?  Is there an "Acceptable Use" policy in place?  And the list goes on.

Will Improvise standardize on a single travel agency, airline or hotel chain?  What kind of training will occur with your associates on international customs, cultures, threats and vulnerabilities.  Who will be accompanied by a buddy system or personal protection specialist when they travel?  Will travelers receive intelligence briefings or reports in advance of their departure?  Commercial or private carrier?

What processes are to be put in place for Improvise to follow, in the way it sells and delivers it's professional services?  What autonomy does each associate have to make their own decisions on the price, scope and deliverable to a client?  How do you interact, treat and question yourselves?  Are your associates subject to any laws from the U.S. or the country they are operating in with regard to selling your professional services?  Why are we doing all of this?

So when you are done with this first phase of the exercise after one hour, how could you improve Improvise, Inc. over your lifetime?  Hopefully, this illustrates the breadth and depth of Operational Risk Management (ORM) and some of the key considerations.  Your single points of potential failure.  Your risk exposures and places to focus your design.  Your decisions and how this shapes your culture and principles.  Your trust and transparency.

One last thought.  How would you currently judge your risk parity?  In other words, how have you allocated risk effectively across the organization.  Not in terms of assets, but in terms of volatility.  Think about it.  What kind of social contract do you have in place to operate together?

Is it true, that you are now on your way to achieving true "Business Resilience"?  We don't know.

04 July 2013

The Franklin Project: Preserving Certain Unalienable Rights...

On this July 4th, 2013 in the United States we reflect on a declaration.  The Operational Risk Management (ORM) of the nation was a priority in 1776 and the "word smiths" surrounding Thomas Jefferson penned our most precious document.

The information contained in the "Declaration of Independence" has withstood 237 years of debate, rule of law and service to the Republic to defend all that it stands for.  However, only 1% of U.S. citizens now serve in the military defense of what the country believes in and preserving our "certain unalienable Rights".  This is a failure of leadership and the Operational Risks of our nation will continue to increase from within our borders, without a substantial solution to comprehensive civilian service.

There are however a few brave people across the United States who have served not only as leaders of the 1%, but as future leaders of the 100%.  You see, the "Franklin Project" is the ideal way for our country to manage a spectrum of current and future risks upon us.  Even a way for the thousands of 501(c)3 charities to converge and share a single and cohesive strategy for not just a few people to serve, but for all those U.S. citizens able to serve, early in their lives:

What is the Franklin Project?
The Franklin Project is a new venture by the Aspen Institute to marshal the best case for a voluntary civilian counterpart to military service in the United States. At the 2012 Aspen Ideas Festival, General Stanley McChrystal called for large-scale civilian national service to engage more Americans in serving community and country. We believe national service can and should become a common expectation and common opportunity for all Americans to strengthen our social fabric and solve our most pressing national challenges. To realize this vision, the Franklin Project engages outstanding Americans from the private sector, higher education, government, the military, the faith community, the philanthropy, and nonprofit organizations, to develop innovative policy ideas and to build momentum around advancing a new vision of civilian service for the 21st century. Our goal is to create one million new opportunities for large-scale civilan national service. 
What is national service? Why now?
National service has always been in the DNA of Americans. By committing to spend a year or more serving our nation full-time, we have the opportunity to strengthen our social fabric, improve on individual skillsets, and solve some of the nation’s most pressing challenges. Today, application numbers for national service programs such as AmeriCorps, City Year, and Teach for America, are higher than ever before. The Corporation for National and Community Service, which supports AmeriCorps programs, reported that there were 582,000 applications for just 83,000 national service positions last year. This means that nearly 500,000 people who were ready and willing to commit themselves to full-time national service were turned away. The current capacity for national service opportunities is thus outpaced the incredible demand.

- See more at: http://www.aspeninstitute.org/policy-work/franklin-project/about-us#sthash.J3m9HyFj.dpuf
So America, what are we waiting for to change the way our youth serves and our nation treats national service?

Each citizen has the opportunity to give back to the improvement of our nation through non-profit charities, religious institutions and especially our military.  What we have accomplished so far is only a start and still years away from what America is capable of achieving.  Civilian National Service will someday be a way for our youth to establish their sense of leadership, philanthropy and strong moral foundation.

God speed to the Franklin Project on our national birthday celebration!