Alliance Software to Combat Hard Risks
We have talked plenty about the high-level strategy around risk management recently, but when alliance managers are in the field, they need a systematic way to optimize those concepts. How should they integrate risk management into their month-to-month duties? What can they do to not only keep tabs on the biggest risk factors facing their collaborations, but also maintain engagement from primary relevant stakeholders? And what does software have to do with it?
All good questions, no doubt, and some without definitive answers. But the founders of alliance management software platform company allianceboard have made a significant contribution by providing a structure for staying on top of potential land mines across the alliance portfolio in the latest ASAP webinar, “Future-Proofing Your Alliances: Risk Management in an Evolving Landscape.”
Risk Doctrine: Many Ways to Classify Potential Threats
In order to manage risks, you must first unearth and classify them, and there are many different structures that help in doing so. Michael Roch, allianceboard’s chief commercial officer, brought up the trifurcated model common in alliance literature in which risks are organized into “business,” “human,” and “legal” categories; the former denotes misalignment between partner strategies, the latter encompasses regulatory uncertainty, and the human element covers differences of opinion among individual stakeholders. Roch then offered an alternative that dissected risk factors more finitely, breaking them down into five categories:
- Internal risks to your organization
- Partner company risks
- Asset risks—threats to strategy or execution around the commodity, service, or piece of value at the heart of the collaboration
- Governance—“risks related to the decision making, including the contractual elements,” as Roch explained
- Environmental risks to both parties
There’s no one-size-fits-all approach. Companies have to segment risks in a way that makes sense to their particular business.
“We’re not doctrinaire. We don’t mind how your company classifies risk,” said Roch. “However your company conceptualizes alliance risk is correct.”
“Not All Alliance Risks Are Created Equal”
Once you catalog them, you have to prioritize risks before you can start managing them.
“Not all alliance risks are created equal; it’s up to you to create that context for your senior leadership and to give insights about it,” said Roch. “You can’t manage all of them, but you do want to manage the ones that are most important.”
The simplest way is to focus on the risks that have the greatest probability of occurring and/or could have the greatest potential impact on your collaboration, portfolio, and company.
Five Practices for Managing Risk
From there, Roch outlined five components to risk management:
- Foster transparent communication—both internally and with the partner—to devise ways to share the risk appropriately.
- Define clear roles and responsibilities in order to reduce the chances of slow or incorrect decision making.
- Establish robust governance structures.
- Level power imbalances to drive decision consensus. Roch gave the impression that it’s rarer to see partnerships with equal power distribution.
- Align on objectives. “The objectives move, management teams change,” especially in long-term collaborations, said Roch. “The alliance has to catch up with that.”
To ensure all parties accomplish that alignment, Roch recommended meeting periodically to review the real and potential economic and non-monetary impacts of identified risks, as well as changes in either organization that may affect said risks. Stakeholders should also redefine and realign on risks as necessary and readjust the agreed-upon risk mitigation plan, accordingly, at these gatherings.
In Case You Missed It: Making Risk Visible
Of course, it’s harder to manage what you can’t see. When risks aren’t aggregated into one centrally accessible location—e.g., they’re scattered in various emails, PDFs, and Word docs—it’s easier to lose track of them.
“Are they really visible to your key stakeholders? How do you make sure you’re not missing one? No one in the organization really has a true complete vision of what’s happening at any point in time [in that case],” said Louis Rinfret, allianceboard’s CEO.
Rinfret demonstrated one way to manage all risks in a single platform. He showed a sample alliance risk matrix with different risks separated by tabs at the top of the screen. Users could view risks at a portfolio level and sort the list by “off track,” “at risk,” and “on track.” When stakeholders want to delve into an individual risk factor, they can click for a brief overview of the risk in the “description” section.
End users can also view individual alliances in greater detail. Rinfret displayed a Probability/Impact matrix, with Impact being charted along the x-axis and Probability on the y. Alliance managers can click on the initiatives appearing in the upper-right corner to address high-priority risks to view the respective owners, review dates, and other pertinent variables. Risks could also be sorted into categories and displayed in a bar graph. Underneath both the Probability/Impact matrix and risk bar graph was a risk and decision tracker that laid out risks for each partnership in greater detail, with sortable categories delineating upcoming decisions, due dates, owners, and other variables, including the department within the organization that is most affected by that risk.
“If you’re going to meet with your R&D, alliance management, or finance stakeholders, then you can focus on the risks that are relevant for the business functions with whom you’re meeting—the owners of these risks, the key stakeholders—and really have an in-depth discussion with [them],” said Rinfret.
Agree to Disagree, Then Talk About It
Software alone can’t help bridge the differences between partners who disagree on the context or severity of a risk factor, but the ability to methodically visualize and discuss those risks goes a long way in resolving those disputes and maintaining a healthy partner relationship.
“Just having the discussion and understanding that you disagree about that risk is a big advantage,” said Roch. “I don’t think being at odds with your partner about a risk is a bad thing; not having a discussion in a transparent way is.”
“It’s something that happens all the time. The earlier this is raised, the more transparent you are about it, the more chances you have to get to a resolution,” said Rinfret. “Having the transparency, and looking at the same thing, being on the same page early facilitates all of this important work.”
Roch and Rinfret had more insights to share throughout the webinar. ASAP members, don’t wait to access “Future-Proofing Your Alliances: Risk Management in an Evolving Landscape” from the ASAP Content Hub for more discussion of addressing risk on a portfolio level, scenario planning, and the importance of a culture of reciprocity within each partner organization.