Knowledge Management and Organizational Risk Management
Sunday, July 15, 2007
Is there a relationship between knowledge management and organizational risk management? If so, how can knowledge management be used to mitigate risk?
Lay Iwan Setiawan
The world is full of uncertainty. Because of this uncertainty, organizations sometimes fail to identify risks or to handle risks properly. Knowledge management has a strong relationship with organizational risk management. Knowledge about past experiences, such as past failures, could be useful for managing current and future potential risks. Organizational knowledge would allow organizations to sense potential risks and respond to the risks properly (Webster, 2007).
Knowledge management can mitigate risks in many ways. Firstly, knowledge management promotes better communication among all elements in the organizations. All employees are encouraged to share information and their knowledge. Typically, employees are encouraged to share something positive, such as knowledge about know-how. However, knowledge management could and should also be used to encourage them to share emerging risks and mistakes. “No blame culture” and openness should be promoted so that employees are free to share “bad news” before the situation become unrecoverable (Webster, 2007). This will increase organizational awareness towards the emerging risks and will lead active involvement from all employees to mitigate the risks.
Secondly, the utilization of information technology in knowledge management initiatives together with the culture of documenting mistakes could greatly facilitate the effort to minimize risks. Those mistakes could include failure to recognize risks and failure to respond properly to risks. If mistakes identified in every past project and past operational process are well-documented in lessons-learned database, the risks of repeating the same mistakes could be minimized. That is, risks associated with certain activities or operations could be easily identified and could be more properly handled. In his article, Verhaegen (2005) show how an organization uses a collaboration portal through which their employees from around the globe share knowledge about risks. Employees from the region where a risk has developed share their knowledge to employees from the other region where the same risk is still emerging. Therefore, the efforts, time, and money that have been invested by one region when figuring out how to manage and mitigate the risk can also benefit other regions.
Finally, risks could also be mitigated by improving employees’ risk management knowledge and skill through in-house knowledge transfer programs, such as in-house trainings and seminars. Otterson (2005) argues that usually knowledge to manage risks already exists in the organizations but not yet being identified. In order to increase their capability in managing and mitigating risks through knowledge transfer programs, organizations should first determine what kind of knowledge is needed to manage and mitigate risks, and identify employees who possess this knowledge as well as their area-of-risk-management-expertise (e.g., warehouse operation risk, IT project risk). From these employees, information about the important learning materials should be gathered. These learning materials would then be organized and institutionalized into core competencies needed to create best practices in risk management. Then, in-house trainings or seminars for employees could be carried out using these learning materials. To determine the success of the knowledge transfer programs, employees should be tested before and after the learning experience to evaluate the improvement of their risk management knowledge and skill.
References
Otterson, S. (2005). Transferring Catastrophe Risk Management Knowledge. Risk Management, Vol. 52, Iss. 5, p. 46.
Verhaegen, T. (2005). Knowledge makes risks manageable. Business Insurance, Iss. 3, pp. 16-17.
Webster, M. (2007). Risk Management Report and Tool Kit. Credit Control, Vol. 28, Iss. 1, pp. 68-70.
Posted by noah 8:08 PM
Labels: knowledge management
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