Monday, 29 September 2014

Risk management - a conflict for iMedia companies

Trying to get a snapshot of risk management in digital development proved difficult and confusing. I was looking to find information about specific risks in project development but they didn’t surface; what did is actually more strategic and thought-provoking.

There is a complete spectrum of risks for tech companies ranging from lack of innovation to the higher risk of insolvency because of not managing financial risks. It’s a minefield. You find examples of larger companies valuing the smaller entrepreneurial risk-taking tech companies because they themselves are too big and slow to evolve business solutions that suit the fast-changing consumer environment. They appreciate the iterative progress/test cycle and user-lead style projects that give faster results. Hence the Accelerator Centre in West London where 11 tech companies have been selected by Barclays Bank and Techstars to invent future financial services. Another such partnership is Centrica and Hive where ‘normal management structures don’t apply’. General Electric (GE) outsource innovation including offering open competitions for ways to improve their products. Get more information on these from the BBC Business News (9 September 2014).

So from risk takers and their culture to the more traditional ‘control risks or else’ cultures. R3 – an insolvency trade body – has reported that tech firms are at higher risk of insolvency because of their failure to ‘factor in the full costs of development or assess the competition’. Apparently tech firms in the North-East are most vulnerable which explains the news item in the Lancashire Evening Post, Tech Sector has high number of firms at risk (29 September 2014).

The key word from the last paragraph was ‘cultures’. The ‘soft risks’ or ‘culture’ of a company are beginning to get serious recognition as a possible financial drain – a hard risk factor! The Dialogue blog (16 September 2014) Soft risk: how culture can fail business, by Richard Finn, gives interesting examples of where a culture misaligned with business purpose has had serious consequences. This is BIG, since he calls for senior management to create a new senior management position (non-executive director) and committee to manage soft risks! How does your company’s culture line up? Richard cites six consequences of a ‘bad’ culture as: business under-achievement, poor products, poor service, damaged investor sentiment, reputation destruction, and talent flight. Well, I’m sure no company wants those.

We’ll end with a conundrum. As I said, this risk assessment seems to follow a circular path. Enter the larger tech company that is targeting bespoke development companies in the government sector: KnowledgeKube from Mercato Solutions. They cite bespoke solutions as costing more and taking more time to develop. They offer a platform and services approach that will drive down costs and give government departments more control. It sells itself on being able to ‘remove the risk associated with bespoke development.

So you see the conflict between the start of this blog where innovation and risk-taking are valued and this last example where bespoke development is itself risky and to be avoided.

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