Prioritizing Risks and Opportunities

There are a lot of tools available to help businesses and managers prioritize changes, but one of the most helpful tools is the simplest – a two dimensional matrix that can easily be used to map out where risks and opportunities sit in comparison to each other. It’s extremely effective when used in a strategy workshop or brainstorming session, drawing on the input of the full leadership team.

Depending on how mature your process and data management is in your business, you may be able to generate these graphs from existing business cases and your risk register. If you don’t have a data store that allows for this, don’t worry – I’ll show you how you can use these tools “off the cuff” to make sure you’re focusing your efforts on the most strategic changes possible.

Background

The basic concept used here is a high level matrix similar to the “BCG Matrix” (Boston Consulting Group) developed in 1986. Although it’s simple, the matrix allows for very quick analysis and decision making for strategic decision making.

BCG Matrix.jpg

The focus is to identify products or opportunities that have good market growth, and which allow the business to obtain a high level of market share. Note that this chart is used to compare opportunities that exist for YOUR business – it’s for identifying the best opportunity for YOU to focus on, so don’t compare your market share to other businesses when using this tool. Place each opportunity relative to the other opportunities you have available. It’s important to also understand that because the chart shows comparative values, your “Stars” and “Cash Cows” may not actually be viable – it’s up to you to develop a more complete business case. If your best opportunities are not viable, you’re going to need to spend more time coming up with better opportunities!

Use Case 1 – Risk Assessment

If you already have a risk register, you’ll have measured your risk on at least two axis – probability and cost / impact. If you don’t yet have a risk register in place, this is a perfect place to start one! Draw up your quadrants, but this time your horizontal (x) axis will be “probability”, and your vertical (y) axis will be cost / impact.

Risk Assessment

It’s important to think about as many risks as you possibly can to make sure you’re covering your bases. The value here is that you can talk about the most ridiculous risks (briefly, depending on the workshop host). Including a risk for alien invasion just makes things like flooding and natural disasters more likely – which means you’re more likely going to plan for it. After you’ve brainstormed on what belongs where, you may decide to limit the scope of the quadrants anyway and decide that some things are simply too low risk or too low cost to even include in your register and analysis.

Use Case 2 – Opportunity Assessment

By now you should have a good grasp of how to use this tool, and hopefully have already started thinking about the many applications. Opportunity Assessment is another perfect fit for strategic workshops, as it allows for a comparison of products, portfolios, departments, or literally any other topic that needs to be invested in to get a return. Often we pursue the opportunities that are presented well, or that are being pushed by someone with a sense of determination. Unfortunately this can lead to incredible opportunities being missed because they’re not considered in context with the most important elements being measured. This is actually the most important discussion – what do you want the axis to be? You can choose – just make sure you’re choosing the things that are actually important to the business, otherwise you’ll start implementing the “best” changes or opportunities and find that there’s little to no energy to actually complete them. For most of my clients, I start with a basic combination of “Difficulty” on the vertical (y) axis, and “Impact” on the horizontal (x) axis.

Opportunity Assessment

This creates a visual that maps well to a very instinctive understanding of the opportunities being considered. You may choose to reverse the direction of the “Difficulty” vertical (y) axis to keep the quadrants the same in terms of which area is the best to focus on – especially if you’re running these sessions back to back or concurrently. As an alternative, you may want to measure something more specific like time costs, commercial costs, expertise / training required, return rates (low / high), return timeline (short term / long term), alignment to core business, or any other metric that is likely to create a comparative separation on this chart, and which will provide insight to the management team. Feel free to mix and match, particularly if you’re working off a business case data set that includes specific variables – but it’s best to do this kind of work either on your own in preparation, or with only a very small group who are actively involved in selecting the criteria for analysis with you, as it can be very time consuming.

Extending the Use Cases

As mentioned in Use Case 2, the options for assessment are limitless using the two dimensions listed, but what happens when you want to add a third metric for comparison? For example, what if you wanted to show your risk analysis including some measure of preparedness or skill level to troubleshoot and resolve the risks? This is simpler in a digital framework using spreadsheets and bubble charts, but can be done manually on a whiteboard (although likely with less accuracy) using size, shapes or colours to add additional dimensions.

You’d use smaller dots to represent those things you are extremely well equipped for, and larger dots to represent risks that you’d have to contract a 3rd party to resolve. You’d use an even larger dot if you don’t even know who to ask for help.

You could use the classic RED, AMBER, GREEN colour coding to identify opportunities that have strong backing within the team, as motivation will most certainly affect the end results.

You could use Triangles, Squares and Circles to highlight geographic locations, allowing you to easily balance or focus investment.

Conclusion

Charts based on this concept allow for a high degree of confidence in analysis and assessment of risks and opportunities, and are an incredibly powerful tool for any strategic planning you do. You don’t need to have a fully developed risk register or project backlog with business cases to use them either – you can literally develop new thoughts on risk and opportunity while you’re brainstorming and running these strategic workshops. Once you’re comfortable working in two dimensions, try adding third, fourth and fifth dimensions to see how much more insight you can gain. Use the output from these workshops to develop a prioritized roadmap and action plan, and record everything into your risk register and project backlog so you’re not repeating work unnecessarily next time you run the workshop. Most of all, set aside time to actually use the tools – knowing about how you COULD prioritize is not particularly helpful. Ideas are commodities, execution is where the real value is.

If you’re looking for better ways to plan strategically, let us know and we’ll work with you to get you moving in the best direction.

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