Change Management: A Risk-Based Approach to Reorganization, Regulation and Recession

Steven Minsky | June 6, 2019

In a recent poll, LogicManager found that among 78 senior executives, 70% believed their organization’s goals would be impacted by a recession and yet nearly sixty percent either did not have a plan or were unsure if a change management plan was in place to prepare.

Adequately preparing for change happening within and outside of a company is not a new goal. Yet many companies struggle with achieving it. So here’s something new: by incorporating change management into your enterprise risk management program, you’ll be able to balance the risk-reward trade offs of change in every scenario.

There are, indeed, an infinite number of scenarios where change will occur in and outside of your business. Regardless of the names these changes go by, your company’s success will always depend on your ability to identify and mitigate the risks associated with this change.

I will take you through three scenarios:

  1. Organizational change
  2. Regulatory change
  3. Recession risk

In these scenarios, combining change management and risk management is integral to your organization’s success.

Scenario One: Organizational or Initiative Change Management

I want to start with organizational or initiative change management because at the end of the day, it encompasses all types of change. That is to say, even if change occurs outside of your company, changes and initiatives within your organization will also have to occur in order to keep up.

So what is organizational/initiative change management? Organizational change management involves identifying the groups and people who will need to change as the result of a new project, process, or strategy, and in what ways they will need to change. Organizational change management then involves creating a customized plan for ensuring impacted employees receive the awareness, leadership, coaching, and training they need in order to change successfully.

What does ineffective change management look like? Change initiatives fail when the change does not achieve its intended objectives, does not deliver the promised results, uses more resources than necessary, remains bogged down by delays, or decreases employee morale.

How can risk management make change management successful? Many business experts have already identified the hallmarks of successful change management. What I want to illustrate is how risk management can help you attain those hallmarks.

Hallmark of Successful Change ManagementHow Risk Management Can Help
Sense of UrgencyRisk Assessments
Completing risk assessments and sharing those results with the people in your organization can help them understand the impact of said risks on the business, encouraging them to adopt a sense of urgency around (and be more accepting of) the change.
Clear Lines of Communication & EngagementCentralized ERM Systems
Implementing change that affects a large portion of the business cannot be left up to one person or department. A centralized ERM system engages employees across the organization encouraging them to take accountability for risk management.
Risks are Identified Before ImplementationChange Management Risk Assessments
You already know that identifying overall risk is important, but when it comes to change management, you must also identify the risks directly associated with the changes your organization is considering. Determining which items will remain the same after the change, items poised to change, and items that could go either way will help you prepare for any potential domino-effects from the changes being made.

Scenario Two: Regulatory Change Management

Perhaps the type of change management most people are familiar with is regulatory change management. With thousands of regulatory changes per year, companies are challenged to respond to change at an ever-increasing rate.

Regulatory change management is a great use case for enterprise risk management since non-compliance carries many risks and because its success depends on centralized documentation, clear communication, and engagement.

Here is an ideal process for managing regulatory change successfully:

Mitigate Recession Risk

Read my blog on mitigating recession risk before a downturn hits.

Scenario Three: Recession Change Management

Yes, a recession falls under change management. Why? Because a recession means change. Changes in the market. Changes in available resources. And so on. We’ve enjoyed a healthy economy for some time now, but many experts are starting to point to signs of an impending recession. Integrating change management and risk management will be a vital step to surviving this kind of change.

There’s a misconception that core business priorities, shifted by the recession, will bounce back after the recession is over. On the contrary, these priorities typically shift permanently as a result, which means preparing for this kind of change earlier rather than later will give you a sharp competitive edge.

Before a recession, when everything is going up, companies tend to go on autopilot and focus less on how they’re providing their core service or product. But then, when the economy is on the downturn, organizational priorities shift to value and efficiency, and suddenly, businesses have to scramble to refocus their attention on creating business processes that deliver their product or service efficiently and cost-effectively while making difficult personnel, product, policy, process, and service decisions.

Avoiding this scramble requires being proactive – the name of ERM’s game. To get off autopilot and refocus on value and efficiency, organizations need a way to risk assess their offerings and identify which aspects of them provide or hinder value or efficiency before the recession hits.

Cross-functional risk assessments and ERM will help you engage with subject matter experts to identify potential risks of a recession, as well as opportunities to mitigate these risks by refocusing on value and efficiency within key departments, products, and services. Going forward with these opportunities means implementing change within your company, which means you’ll be scrolling back up to scenario one to make sure those changes are managed successfully.

Want to learn more about change management?

We’re creating a helpful guide that goes into more detail on these three scenarios and provides tactical tips on how to achieve successful change management. Fill out the form to be the first to receive a copy when it’s ready!