Risky Business

Risk management has been on our minds this spring and summer. It was the subject of our Q2 2023 Strategic Alliance Quarterly cover story, “What Could Go Wrong?” Additional insights into the practice of scenario planning made it into our piece, “Rehearsing the Future: Scenario Planning Basics,” which appeared in the July 2023 edition of Strategic Alliance Monthly. 

Any why not? Over the past few years, our alliances have been subjected to some of the biggest risks one can conjure up: a global pandemic, a war right smack in the middle of some of Europe’s most important manufacturing regions, economic fluctuations, and mass layoffs in certain industries—all of this on top of the usual competitive, market, and cultural risks that come with individual collaborations.  

Last week, ASAP’s editor in chief and senior editorial consultant Michael J. Burke, the author of the in-depth Strategic Alliance Quarterly feature and coauthor of the Strategic Alliance Monthly article, moderated an intriguing discussion with three veteran alliance managers that added new insights that didn’t appear in either of those pieces as part of ASAP’s latest webinar, “Storms on the Horizon: Alliance Professionals as Risk Managers.”

“Don’t Do Harm as We Are Trying to Do Good”

The three panelists kicked off the discussion by outlining some of the risks they tend to face in their partnerships. Tony DeSpirito, vice president of global strategic alliances at Vertiv, broke down some standard risks that come with IT partner initiatives. Alliances with larger organizations might present little financial risk, but they come with market and reputational risks. Potential hazards related to solvency tend to come with smaller partners that are still establishing themselves in the marketplace. 

Regina Lemus, CA-AM, PhD, an alliance and project manager at Takeda, said the biggest potential land mine in her portfolio, which consists largely of discovery-stage pharmaceutical alliances with academic institutions, “is the science itself; it’s inherently risky.”  

“We have to be nimble. We have to know when to pivot things, when to stop things, or when to double down,” she added.  

Herb Ehresman, CA-AM, brought a unique perspective as principal of strategic alliances at Compassion International, a nonprofit that is providing various types of aid to 2 million children around the world. In addition to the many forms of geopolitical risk—continuity of operations in unstable countries, internal civil war, election conflict, cross-border strife—his organization must consider what he called a “doing-harm risk” and take into account the effect “bad actors” might have in their daily operations.  

“We work with children and youth, but we don’t work directly with them. Child abuse, child protection processes, response mechanisms to safeguard the people we serve are key to our way of thinking and managing individual risks, making sure that we don’t do harm as we are trying to do good,” he said. 

One Team in the Foxhole Together Faces Down the Unknown 

It’s important not to wait until a crisis presents itself before addressing risks. Partner organizations should jointly anticipate potential dangers as early as the partner selection and onboarding phases. DeSpirito and his partners assess “known unknowns” and “unknown unknowns” in conjunction with setting up governance structures and cadence. 

“It’s a line item on our onboarding checklist,” he said. Governance “turns into your sense-and-response mechanism,” particularly for the unknown unknowns that arise over time. Thus, if the alliance isn’t getting its joint solutions to market quickly enough, or the relationship stalls getting out of the gate in its first six to 12 months, the partners can “flex and pivot,” accordingly. 

Lemus said the cultural fit assessment in the partner selection stage can help immeasurably in finding a partner you want in your foxhole. 

“It’s much easier to talk about risk when you feel like you have trust, and you’re one team working together,” she said.  

Trust in Legal, but Don’t Talk About Trust

Ehresman recommended proactively checking with your legal department in the partner identification stage. 

“If you’re not getting risk input from them, they’re probably holding something back from you—not intentionally, but just because they haven’t thought to pass it along,” he said. “They know risks, and they should be disclosing those.”  

DeSpirito agreed that legal is an important risk assessment stakeholder, but he urged listeners to think about how they position the ask. 

“If I go to the legal team and talk about trust they just kind of chuckle at me,” he said. “I don’t necessarily use the ‘T word’ when I’m talking to my chief legal counsel.” Instead, he discusses risks and what else it would take to “paper the deal,” language that tends to resonate with lawyers. 

The Courage to Say No  

At one point, a listener shared her plight of being installed as the new manager of an alliance that is stuck in the mud. Her question: How should she break it to all parties that the risk of continuing this alliance’s operations far outweighed the rewards? In other words, it is time to get people to confront the harsh reality that the collaboration needs to end. 

In Lemus’s view, whenever there is a change in an important stakeholder—and who is more important to the day-to-day operation of a partnership than an alliance manager?—“you really need to reset the whole relationship.” That means sitting down with the internal team and reevaluating if the initial stated strategic goals are still relevant and whether or not the partner still represents the best way to achieve them. If a misalignment is identified, bring it to the partner’s attention and give the organization a chance to identify new points of value. If your company is feeling like the collaboration has lost momentum, there’s a decent chance that the partner might have come to the same conclusion.

“They may not be getting much out of this either,” Lemus said. “That’s a courageous choice, to say ‘no’ to something, but it’s important to do. Saying ‘no’ is just as important as saying ‘yes.’”  

DeSpirito seconded this course of action for a new alliance manager. If after gathering the facts it appears that it is in the company’s best interests to exit the collaboration, the conversation should be easier because the data to support that conclusion is in hand.  

“Once you do your due diligence and it all comes out, the decision to terminate will be a fairly easy one,” said DeSpirito. 

What’s in the Cards for the “New Guy”?

In some senses, ignorance can be bliss. Or put a better way, the new alliance manager’s fresh perspective often makes it easier to have tough conversations and make hard decisions.

“This might be an opportunity to play the new-gal or new-guy card,” said Ehresman, before adding that it’s important to discuss the current state of affairs with your senior leadership. If your ultimate bosses have made up their minds about the partner, it might reduce the scope of the alliance manager’s initial investigation. “Make sure there isn’t a right answer waiting out there for you” before trying to solve problems. 

“You’d be surprised at how long the new-person card gets you. I used it for a full year at Vertiv,” quipped DeSpirito. 

It’s an opportunity for the alliance manager to challenge people to illustrate why the current modus operandi is still the right course for both allies. 

“Then people are compelled to at least give some kind of justification or defense of [the partnership],” said Burke. “Then it can be reevaluated.” 

 “Storms on the Horizon: Alliance Professionals as Risk Managers” will be added to the ASAP Content Hubsoon. Watch the webinar to learn how to involve senior leaders when things have gone awry. Also, Ehresman shares the “two modalities” of failed risk management in C-suite executives: 1) the executive who takes the too-broad portfolio view versus the project view, and 2) the visionary who only sees an initiative’s upside and dismisses the risk conversation with a “just-take-care-of-it” attitude.