In the seventies, Xerox was as omnipresent in American offices as the Microsoft Office suite is today. And just like Microsoft, Xerox leveraged its success to invest in the technologies of the future. One of those innovations, called the Alto, was the world’s first personal computer. At the time, Xerox was so focused on revenues from its copying business that it didn’t realize the Alto’s potential. But Steve Jobs did. After seeing a demo, Jobs incorporated many of the Alto’s innovations into Apple’s next computer, the Lisa. Obviously, the rest of this story is now history.
This cautionary tale is familiar – but it underlines a central lesson for any business attempting to plan for the future today, by placing digital innovation at the heart of their business transformation. When it comes to managing the risks involved, it’s no longer enough to focus your attention on preventing downside risk – that is, the possibility of something going wrong within your organization. With the incredible pace of disruption, failing to take advantage of the upside of risk – the chance to seize new opportunities – is often the most dangerous risk of all.
In fact, we’re now living in a moment when we need to embrace change and expand the whole way we think about risk. Along with upside and downside risk , outside risks like geopolitical instability and climate change are on the rise. Businesses are now facing more risk – and more kinds of it, from more places – than ever before.
The good news is that we also now have the technology to get ahead of these risks. We can analyze data from across and outside of an organization – and then turn that information into actionable insights. We can better see how any single decision is likely to affect the organization’s future. And instead of simply looking backward at what’s happened in the past, we can focus equally on where our businesses and industries are headed long term.
When businesses have a more focused view of these risks, they can feel more confident in their decisions – and help investors and other stakeholders trust that the business knows where it’s going. And at EY, we’ve found that there are three rules of risk management for any organization that wants to navigate this moment of disruption and thrive in the long-term.
First, it’s crucial to analyze risks in real-time, instead of looking backward at older data that takes too long to collect. Second, major decisions should be modeled using “what if” scenarios, so businesses can look at how they might create changes across their operations. And third, it’s vital to bring multiple perspectives to the table to help ensure you’re looking at situations from every angle.