In a previous posting, I described the need for risk managers to become more of a strategic partner for other departments in an organization. The one big obstacle that risk managers will need to overcome is the transactional mindset that is at the heart of risk management. Risk managers have the three lines of defense that are described best as policies and procedures or tools and systems for transactional supervision which leads to a transactional managerial style. In our daily work lives, were running hard to get things done, pushing for the next deadline or due date. This transaction style maintains the status quo and makes it very hard for any transformational changes to take place.
This maintaining of the status quo will prevent risk management from becoming a strategic partner for any organization. To become a strategic partner, risk managers will need to take on a transformational leadership role. Transformational leadership will promote an evolution and exploration of new systems and tools that may alter the status quo rather than maintaining it. An example that I can think of is the loss of private corporate secrets and information. While a loss of information many not have a financial loss today, there may be significant corporate losses in the future that could have been prevented. A transactional manager will deal with the single loss of information and how it could have been prevented. A transformational risk manager would create a project to understand what information across the whole organization should be deemed important, create systems and tools to prevent any additional losses and create an education program for all employees so they understand the importance of privacy and secrecy. The holistic transformational thinking of prevention and education does not happen in an instant, it takes time and training.
Risk Managers need to understand the difference between transactional leadership and transformation leadership. This understanding can be used to make small incremental changes in their day to day business dealings, then overtime, more and more transformational activities can be introduced. While there will always be a need to be a transactional leader, other departments will take notice when there is a perception of transformational leadership. Transformational leaders attract open interaction, dialogue and creativity, yet the most important is developing consultative trust. It’s developing the consultative trust between risk management and the other departments that will lead to becoming a strategic partner in any organization. This transformation to becoming a strategic partner will not happen overnight, it takes time and persistence, yet in the end the benefits will far exceed the effort expended to get there.