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AREA Method: What to Do When Everything Becomes Unknown?

By June 18, 2020June 21st, 2021Podcasts

What do you do when everything becomes unknown? So much of our daily lives now seems to fall into the “unknown” category: Is it safe to go to work? Should you cancel your family plans for vacation? What about going out for a slice of pizza? Yes or no?

Usually, we differentiate between big and small decisions but in today’s Covid-19 world, small decisions can carry big risks. So how do we assess risk, especially when anxiety overshadows our decisions?

Lao Tzu wrote in the Tao that “The journey of a thousand miles begins with the first step,” but a better translation of this familiar passage is to say the journey begins beneath our feet – not in the first step but in the stillness that precedes it, in the place where we stand before we move, in the very ground of our being.

So before you make your next decision, big or small, consider standing in the stillness. Ask yourself: Can I frame and break down where I am in a way that is both manageable and focused on what matters to me, to the people I love, and to my professional life?

Individuals aren’t the only ones who would benefit from standing in stillness. Organizations, both nonprofit and for-profit, have been affected by the Covid-19 outbreak. Many — from colleges to sporting teams to companies — have been forced to cancel future events and now must figure out how to handle the consequences of those actions. How might these large organizations stand in stillness to consider how to move forward with disparate stakeholders? While we can never know the future, we all need to have a way to work with and through ambiguity.

What follows are my suggestions for how to stand in the stillness, and step back from an immediate decision, specifically related to you or your company’s relationship to risk.

How do we frame and break-down risk?

There are three components of risk:

  1. Risk appetite
  2. Risk assessment
  3. Risk analysis

Risk appetite: At its core, risk appetite is the level of exposure you or your organization are willing to take. It is your tolerance for risk. It is subjective and will vary between and within organizations as well as from person to person.

Recommendation:  Discuss the level of risk appetite that is acceptable with your other stakeholders, whether those are loved ones or your work team. Having a common definition and lexicon helps everyone feel included and understood and lays a foundation for a more fulfilling discussion and problem-solving experience. 

Write out a risk appetite statement that everyone can agree upon. Make it clear that the statement is not just a topic of conversation, but rather is something that you and your team are committing to. Consider:

  • What kinds of risk taking do you want to encourage?
  • What kinds of risk taking do you want to prevent?
  • How can you continuously assess and analyze risk?

Having a statement that explains the shared commitment sets the guardrails.

For example, your organization has been forced to cancel a major conference. There will be all kinds of fall-out from cancelling. How do you manage the fallout to be in line with your company’s values, purpose and goals? The company faces losing out on sponsorships, key potential new business contacts that were involved in the programming and the contract signed with the venue, to name a few consequences.

It’s easy to get caught up in the immediate problem, but in defining risk appetite, try thinking about focusing on what matters before you deal with the problem itself: what do you want to preserve? What do you hope to encourage and to prevent? Already established professional relationships, the monies at stake or the new contacts? Defining your risk appetite will enable you and your team to weigh what may be competing concerns (the lost dollars versus the future business relationships).

Risk assessment: After deciding what your risk appetite is, how will you assess the risks of the situation you are evaluating? At its core, assessing risk is about defining objective criteria that you can vet with research.

Recommendation: Using your risk appetite statement, define objective criteria by which you will assess if a decision is within your risk threshold. 

Outline why you are choosing the parameters you set and make them transparent with your team or stakeholders. Consider:

How do the parameters mesh with your vision of success for your company or yourself? Your vision of success is the answer to the question: What has to happen in the outcome of the decision for me to know that the decision has been successful? It can guide you by inverting the problem to focus on what you define as a good outcome.

What kind of research will be acceptable to you and your team to answer the above questions?

Example: As your company weighs how to handle the impact of the cancelled conference and sets the risk assessment parameters, you will want to put the problem into context. To do that, research could include how companies handled sudden cancellations after other natural disasters, such as Hurricane Sandy, and how those moves were perceived publicly.

If what you decide is that your company’s primary goal is the preservation of the relationship with the main sponsor you might decide one objective criteria is ensuring that your company can work with the main sponsor for future events. How could this play out? It might mean returning money to the sponsor, even if you are then not able to offer some payment to speakers to cover their cancelled travel plans. In an ideal world you can do both, but the world is not always ideal.

Risk Analysis: In this final step, you are ready to analyze your results. At its core, risk analysis is another subjective step because different analysis tools will portray different pictures of your data and provide different kinds of insight. In my AREA Method, I lay out different analysis tools to assist you in this step.

For example, I discuss the benefits and drawbacks of tools such as a Pro/Con analysis, which doesn’t develop a view of a situation, but rather enables you to view and consider two opposing outcomes. Another tool, the Scenario Analysis, considers possible outcomes and their implications after a given period of time. It doesn’t imagine a single future, but looks instead to envision several alternatives futures based on key factors that you or your organization identify. It is not predictive, but can help manage uncertainty.

Recommendation: Determine the most appropriate kind of analysis, or analyses for you or your organization. Consider different tools and recognize that analysis tools, while often interrelated and sensitive to the data you choose to test, evaluate data differently.

Example: If you only have the funds to maintain the relationship with your primary sponsor, or offer payment to speakers, both the Pro/Con and Scenario Analysis would be useful in thinking through the outcomes. Does your company need a more complete picture or a better understanding of the range of future outcomes? Or something else before deciding?

We are individuals, members of a family, and part of the economy all at once. And we were those things before the current crisis. We had a way to think about risk then. Tap into that, maybe now, in an even more intentional way.  By standing in stillness, we can invest in ourselves and our companies by thinking through how to frame and break down what risk entails. That in turn may better allow us to face uncertainty aligned with our values, purpose and goals.

Ready to make big decisions better?

Would you or your team like help making your next big decision better? Contact Cheryl directly about working with her and using her digital decision-making modules at Cheryl@areamethod.com.

Follow Cheryl on Twitter and find her on Facebook

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