Change initiatives fail when the change does not achieve its intended objectives, do not deliver the promised results, sacrifices quality, use more resources, or remains bogged down by delays. Change Management risk assessment makes an attempt to identify such factors that negatively impact the business and prevent people from fulfilling their roles, and control the change to eliminate or improve such factors.
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How to Establish Scope of Risk Assessment
The best way of initiating a change management risk assessment is by dividing all the things that come under the scope of the change management program into three groups:
- items that remain the same after the change
- items poised to change
- items that could go either way
The items that remain the same do so mainly owing to their indispensability for the core business process or the very existence of the business in their present form. Examples of this category include patents, building and machinery, key personnel, and other capital assets. Such items normally do not pose any risks during the change management process.
The second list of items poised to change usually includes assets that have no value to the company’s core business. This includes outdated equipment, space that is standing idle, underused positions in the company, redundant processes, outdated product mix, and even redundant staff. Replacing or eliminating such items either reduce expenses or enhances revenue flow.
Risk assessment for this second list need to focus on:
- ensuring such items are really not needed for the company’s core processes
- making sure that the company leverages opportunity costs by shedding the discarded items and taking in new items in their place
The third list in the change management risk assessment is the gray area or items that could change or remain the same on implementing the change. The major scope of risk assessment lies in this group of items, to determine whether possible changes in such items pose a risk to the organization.
The best approach towards risk-assessment for items in this third list is through effecting a trade-off. For instance, curtailing the assembly line might curtail expenses and lead to better operating efficiency, but it might come as loss of morale to staff and loss of prestige owing to running a reduced set up. Risk assessment entails comparing the benefits of efficiency with the losses owing to loss of morale and prestige.
How to Undertake Risk Assessment
The foundation of risk assessment analysis is gathering information from all possible sources, and undertaking analysis using all possible resources.
The factors that require assessment for a good risk analysis include readiness and availability of technology, quality and integrity of data, budgetary consideration, extent of human resources readiness, impact on human resource competencies and attitudes, impact on business operations, extent of customer acceptance, and extent of third party supplier acceptance, among other factors.
Another dimension of change management risk assessment is determination of future returns of a new capital investment such as automation. For instance, computerization of a reservation system for a transport company might streamline the process, but also attracts the risk of unstable technology putting the system haywire.
The most common methods of risk assessment techniques include:
- statistical probability analysis
- interview with stakeholders
- conceptualization through lateral thinking, and more
The best form of risk assessment analysis lies in using such methods to categorize the risk into many categories, usually three: low risk scenario, medium risk scenario, and high risk scenario. Some assessments draw up a worst case scenario. Risk management programs entail assessing the impact on the change on the organization in all such scenarios and deploying effective countermeasures to either mitigate the effects of the risks, or deflect the risk.
Change management risk assessment provides the potential for maximizing benefits but also creates obstacles. The harder the decisions in the change management risk assessment, the more the level of risk, and higher the risk, better the potential for profits.
The key to successful change initiative is making risk assessment decisions with due diligence, and following up on the decisions made.