Risk managers can play a key role in developing knowledge, says David Ketley.
The ancient Egyptians believed it was the path to immortality. Prospective London cab drivers must have it before they can obtain a licence. It is something we all acquire every day of our working and private lives. But how many of us are actually using it to its best effect?
I am talking about knowledge - the ability to benefit from information - which has been the theme for my year as chairman of AIRMIC and which will be the theme for AIRMIC's annual conference at the East Midlands Conference Centre, University of Nottingham, from 29 March -1 April.
Dr Samuel Johnson said: “Knowledge is of two kinds. We know a subject ourselves or we know where we can find information upon it.” In an era of increasingly complex technology, and the ever growing influence of the internet on our lives, the second of these is the more important.
The most crucial component of any organisation when it comes to creating knowledge is people, but people can also be an obstacle. A recent KPMG survey showed that almost a third of companies had problems in getting staff to share knowledge. Homo sapien has always been a hoarder, as archaeology has revealed, but now we are hoarders of information. The changing of job security, the uncertainty of global economies, has made us protective. Knowing something no one else knows gives us a feeling of security, a feeling that we are needed.
If individuals squirrel away information in this way, it restricts a company's ability to gain knowledge. When the left hand does not know what the right hand is doing, it can produce internal friction, inefficiency and a poor impression in the minds of the customers.
Do senior managers impart knowledge to staff by sharing the kind of information normally reserved for the privileged few - regular financial and performance reports, for example? While they spend large amounts of time and money creating web sites for the outside world to read, are they ignoring the potential of an intranet to tell employees what is going on in the company?
Economic growth and knowledge
Knowledge within business requires the free flow of information - upwards, downwards and sideways. In one of his last acts as Secretary of State for Trade and Industry, Peter Mandelson published a white paper on competitiveness which called on UK companies to develop knowledge and innovation. The white paper argued that knowledge was becoming more and more important as a factor in economic growth because of four mutually reinforcing developments:• rapid developments in information and communications technology;
• the increased speed of scientific and technological advances;
• greater global competition; and
• more sophisticated demand patterns caused by growing prosperity.
These factors are changing the way businesses compete, increasing the importance of innovation - the theme of the AIRMIC conference last year - and increasing the returns on products with a large knowledge component, says the white paper. It encourages companies to collaborate more effectively, an area where risk managers can play a vital role.
An effective risk manager will have more knowledge about the workings of the company than probably anyone else within the organisation. The finance director will have all the figures, but may be ignorant of production issues. The engineering manager will know which machines are crucial to production, but may not be aware of the financial impact of their loss. The sales director may not know the potential implications of accepting a customer's conditions of sale rather than the company's own.
The role as a catalyst for the exchange of knowledge is where the risk manager has the opportunity to influence the business, but it can only be achieved by effective communication - not simply by having every employee linked by e-mail, or having a rigid structure such as cascades and circulation lists, but by exchanging ideas and information with people on their home ground. Only by meeting people and sharing information about their requirements, their aspirations and intentions are we able to gain the knowledge we need to help us get the greatest benefit from our relationships with colleagues, customers and suppliers. Too much of what passes for information is based on assumption or perception; but assumptions can be misleading, or, at worst, totally untrue. We need to go out and get facts or test assumptions to get the true picture.
This picture must then be communicated to everyone who needs to know, and to those who can add further knowledge. Risk managers need to listen to what is being said, not what they want to hear. To accept answers like: “We do not think we have any problems because we are pretty sure we can find a replacement machine from somewhere” is not good enough.
Risk managers must challenge such statements, and only when they are satisfied that a replacement machine is available within an acceptable timescale and at an acceptable cost can they regard the information as knowledge.
Knowledge, when properly managed, enhances a company's efficiency and profitability. Risk management crosses all boundaries within an organisation, which makes risk managers uniquely placed to spread knowledge from one division to another. The Prime Minister, Tony Blair's, foreword to the white paper says: “Our success depends on how well we exploit our most valuable assets - our knowledge, skills and creativity. They are the key to designing high-value goods and services and advanced business practices. They are at the heart of a modern, knowledge-driven economy.”
At our annual conference, AIRMIC is aiming to make delegates aware of how important a tool knowledge can be when used by an adept risk manager. The pursuit of knowledge may not make risk managers immortal, as the Egyptians suggested, but it should certainly meet the London cabbies' criteria and help guide professionals through the maze of an increasingly complex commercial world.
David Ketley is chairman of AIRMIC.
Among the keynote speakers of the conference is Professor Chong Ju Choi, who is Gyosel professor of international business and head of the department of strategy and international business at the City University Business School. Appropriately to the theme of knowledge, Prof Chong specialises in intellectual and knowledge transfer among other subjects. His talk, the opening session of the conference is entitled: Winners take all in knowledge based industries.
The next speaker will be a conference favourite, Prof Gordon Dickson of Glasgow Caledonian University where the first European degree in risk management was developed. His topic is surviving education. The individual presentations on the first morning conclude with Jack Sinnott, vice chairman and ceo of J&H Marsh & McLennan, on the subject of the role of knowledge in a riskier world, and Lloyd's chairman Max Taylor on knowledge sharing in the marketplace. Broadcaster Sara Coburn will summarise the key issues raised by the guest speakers and then bring them altogether for a forum discussion.
On the first afternoon, there is the choice of the usual wide spread of workshops or an innovative session called The next great plague of London. It brings together a team of members from the NHS, local government, a pharmaceutical company and the Institute of Risk Management (IRM) to discuss how risk management can help society respond to life or death threats.
The workshops include topics such as improving the claims process by sharing knowledge, intellectual property, alternative risk transfer, the practical implications of civil justice reforms in England and Wales and risk management within the scope of bancassurance.
The movement from knowledge to decisions is the subject for another academic, Dr Lawrence Phillips, on Wednesday morning. Dr Phillips is visiting professor of occupational research at the London School of Economics (LSE). His expertise lies in applying a variety of approaches to issues of strategic and operational management, including resource allocation and crisis management.
A second series of lectures and workshops offers topics such as selling risk management to the board, legal services for risk managers, evacuating staff and their families from trouble spots, corporate governance and IT developments. In the afternoon teams representing brokers, insurers, other service providers and AIRMIC members challenge each other to see who has the best knowledge of risk management in a light hearted contest, universally challenged, before AIRMIC executive director David Gamble draws some conclusions from the conference as a whole.