Strategia champions military planning for corporate risk management

14 January 2019 Authored by Consultancy.uk

Formed by two former British military figures, Strategia Worldwide aids business leaders to understand the interconnectedness of risk, and how they can combat it. In conversation with Consultancy.uk, former NATO Deputy Supreme Allied Commander Europe Sir Richard Shirreff, co-founder Iain Pickard and Associate Director Pascal Hogenboom explain how adopting a military methodology for risk management can help.

Up until 2014, Sir Richard Shirreff did not combine his extensive military experience with any kind of commercial venture. A professional soldier for 37 years, he commanded at senior level in a number of campaigns, in the multinational context of NATO. Toward the end of that extensive career, however, Shirreff had become increasingly aware his time with the military would likely come to an end. Then, an engagement prompted him to begin thinking of what might come next.

“I was advised to look carefully at how risk was managed,” he told Consultancy.uk. “It was particularly to do with the extractive industries of oil and gas and mining, just after the BP saga in the Gulf of Mexico. What I was struck by was how risk was being siloed there. We learned the hard way from mistakes in the Balkans and in various other military campaigns, that there is no such thing as a single military approach. You have to build bridges with other stakeholders; reconstruction, development, humanitarian international organisations, NGOs and the like, to provide an overarching management of risk, establishing unity of purpose and understanding to create the success factors you need. After seeing that, I felt that what I actually had learned would be useful to the commercial world.”

Shirreff initially started out on his own, but a chance encounter via LinkedIn changed things soon after. It was then the co-founder of what would become Strategia Worldwide, Iain Pickard, a former Partner & UK Head of Financial Services at RSM, who is also an ex-military man of some 20 years, contacted him about his ideas. The pair looked at the potential for military practices to be applied to risk management and decided there was indeed something in it, before formally launching Strategia Worldwide in 2016.Strategia champions military planning for corporate risk managementAccording to Shirreff, the essence of Strategia’s offering is that the firm helps clients understand the nature of risk, and adapt a strategy to deal with it and protect value. He outlined two key aspects of the firm which help to deliver this to clients. First, he said, the firm’s multitude of talents helps to build a thorough and all-encompassing picture of risk for clients.

“We have a global network of 70-80 professionals, constantly growing, from Australia, Africa, India, the Netherlands, America, across Europe, and obviously in our base in the UK – so we can always find someone who knows something about somewhere. Importantly, they also have a great wealth of experience and diversity of background. While our network consist of several ex-military professionals, we’ve also got ex-diplomats, politicians, mining experts, and former CEOs, like Pascal.”

Like Iain Pickard, Associate Director Pascal Hogenboom in fact embodies this diversity of knowledge in a single package. Hogenboom is a former CEO of Aon Hewitt in the Netherlands, holding more than 17 years of experience in the financial services sector to boot, but he also has more than 8 years of military service to his name. He served with the Royal Netherlands Marine Corps and the Air Assault Brigade, during which time he did tours in Bosnia and Kosovo.

Summarising what makes this hybridisation of experience so important for Strategia’s clients, Hogenboom said, “Many firms we work with admit that their focus is literally just on current risks, while the really smart ones look ahead a year and try and guess what risks might emerge in an uncertain future. The military mind works the other way though; it looks at the desired end state, and plans back from there. If you look at having to go to another country with a military force for example, you start looking at what is the desired end state here. So in however long, we want to leave a stable military presence, and have a stable economic and political environment which can prosper. From the start then you know you will need these other stakeholders to deliver that. You plan first, with these stakeholders, and its then leadership through influence, not command.”

Military method

Indeed, it is this methodology which is the second major strength Strategia brings to businesses. Applying the rigour of military strategic design to managing risk is at the core of the firm’s offering. Iain Pickard explained, “We’ve adapted what the military calls a campaign plan, but it’s been adapted in-house for a commercial application. We’re not like a conventional consultancy then, particularly in the field of risk. Very often, what brings a company down is a combination of many issues, social, political, financial, cyber risks all at once. We offer a comprehensive approach, and without that you can’t manage these risks effectively.”

“It’s not so much the plan that matters, the planning process of assessing, understanding and reassessing is what counts. If you develop that intellectual muscle memory from that process, you can btter respond to issues.”
– Sir Richard Shirreff

Shirreff added, “We look right to left, which makes us unique in the risk management field. We look at the vision, the end-state, where we want to be, not where we are, and then design a right-to-left path to get us there.”

The consequences of siloed risk management can be severe, but Strategia often encounters companies which have little to no idea that a problem in one area could come back to bite them in a totally different way. The interconnected nature of modern business subsequently leaves them open to a host of negative impacts from risks which they did not even consider were related.

Hogenboom said, “In our experience, financial risks, operational risks, strategic risks, reputational risks are seldom handled on the same table, and it is rare that we see a single board with risks in a comprehensive view. What makes this such a problem? We recently met a pharmaceutical executive who wanted to implement a new IT system. He was warned by lower management that ‘this will go wrong, we have to test it’. The board ignored it, and things did indeed go wrong. Is an IT system going wrong for a couple of days bad? Not that bad in the immediate sense, but as a result, the organisation was unable to deliver medicines to, for example, cancer patients. What do you think happened with their reputation?”

Pickard added another example of a potential problem for a company in the future, “A UK company has a very successful aspect of its business in funeral parlours. In order to make the gravestones, they import materials from India. Now, that exposes them to the Modern Slavery Act, and curiously in their annual report they make a big deal of being compliant with that legislation. However, if you look at the risks being reported to the board, it doesn’t appear. There is nothing about the threats to their reputation – non-compliance with Modern Slavery legislation in particular – with the consequence is that there would seem to be a gap in their control framework; have they got someone going out and visiting the quarries, or their suppliers to ensure child labour isn’t used? They say they comply with the Modern Slavery Act, but how do they know that?”

Best laid plans

Holistic risk planning is only half the struggle, however, even when done right, and in a rapidly changing business environment, things can go wrong fast. This makes the rigorous testing of plans essential. Shirreff acknowledged that no military commander would launch an operation without testing their plan with a ‘red team’. Before deploying any tactic, it is important for those executing the plan to understand what hypothetical scenarios could emerge while they attempt to do so.

Quoting nineteenth-century Prussian military commander Helmuth van Moltke, he said, “no plan survives contact with the enemy.” It’s not so much the plan that matters, the planning process of assessing, understanding and reassessing is what counts. If you develop that intellectual muscle memory from that process, you can respond to issues that might otherwise throw off your plan, as they arise.

“The military is hierarchical in a sense, but that is one of the reasons it is agile. In a battle you need a level of control to make things happen quickly. Business is no different.”
– Iain Pickard

To that end, Shirreff added war games are an important aspect of preparing to manage risk. “The thing about war gaming is that it’s a formal process. It is difficult to mark your own homework, so the creation of teams to pick them apart for you provides you with someone else who can give an objective view on it, think the unthinkable, and ask difficult questions.”

In an age where agility and horizontal culture are increasingly fetishised by businesses and consulting firms alike, it is this combination of long-term planning and muscle memory which Strategia’s leaders cite when asked if the military approach might not be a bit old fashioned. While the military is often thought of as an uncompromising hierarchical structure, according to Shirreff, the institution would not function if there was no potential for the ideas of lower ranked personnel to be facilitated.

“The military is hierarchical in a sense, but that is one of the reasons it is agile. If I say go, you go. In a battle you need that level of control to make things happen quickly. At the same time, don’t kid yourself that the military has no means to harness the genius of its personnel though. When they consider a problem, planning an operation, part of that understanding process is a roundtable session where 10 or 15 people of different ranks, disciplines and capabilities are all encouraged to have their say in the right environment. Rank has no privilege there until a decision has to be made, and the commander or the boss says what the direction of travel is; ‘now we plan for it.’”

Shirreff’s fellow Managing Partner Pickard further enthused, “This notion of empowerment is so important. Trust your subordinates, ensure they know your intent and let them get on with it. In the military you might be a general in their headquarters, or a corporal sitting on a bridge watching the enemy approach, but who is better to judge the situation? Of course it is the corporal. If he has the training and the ability, and resources, he can do something about it. Business is no different. You need that diversity of ideas, but to execute, you still need that hierarchy to get things done. It’s getting the mix right. I hear businesses all the time say they are full of good ideas but can’t make them happen, and that’s where you need leadership, hierarchy.”

Meanwhile, for Hogenboom having been in both worlds, he said he can see how that applies first hand in Strategia. He concluded, “As an Associate Director, I understand what Richard’s strategic intentions are, and he then gives me the level of trust that I am capable and suited to make my own decisions on my own level. It is too complex for Richard to lead an entire organisation in a fast-changing environment, so when you talk about agile, the only way to succeed is for all the people to know Richard’s intent, and at the same time get the freedom and trust to act on their own to get to that point. That’s the true meaning of agile.”

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