How to Navigate Uncertainty and Risk
Doubt can be uncomfortable and stressful. We’re wired to want certainty. Certainty provides confidence and drives decision making in both our personal and professional lives.
Risk management plays a big role in creating and developing certainty.
SWOT and PESTLE are two different analyses that can help guide you through risk management and move you towards certainty in any decision-making process or evaluation.
Doubt can be uncomfortable and stressful. We’re wired to want certainty. Certainty provides confidence and drives decision making in both our personal and professional lives.
Risk management plays a big role in creating and developing certainty.
In business and in life, there are many different tools that are used to measure and provide certainty and avoid risk. From customer surveys, warranties and product guarantees, to security systems and safety devices we install in our homes– certainty makes us feel secure, comfortable and drives decision-making.
Boosting levels of certainty has a lot to do with understanding and mitigating potential risk. However, uncertainty can be more dangerous than risk. If you don’t know the risks, you will have difficulty finding solutions – and certainty.
SWOT and PESTLE are two different analyses that can help guide you through risk management and move you towards certainty in any decision-making process or evaluation.
SWOT ANALYSIS
SWOT stands for strengths, weaknesses, opportunities and threats. It is an analysis used for gauging uncertainty, recognizing ways to mitigate it, and moving forward with a potential solution.
To execute a SWOT analysis, it’s important to know what you’re analyzing.
The “SW” in SWOT analyzes the attributes within an organization, whereas, the “OT” analyzes the attributes outside of an organization.
Below are examples and questions to help you better understand how to work through the SWOT analysis.
Strengths
Consider what you or your company does well over a competitor. For example, you might be good at data management or have short delivery lead times on products whereas your competition might not have any of that. Remember, this in an internal analysis, not what you do well in your market segment.
Weaknesses
Here we ask the question: what are some characteristics or attributes of our business that put us at a disadvantage over competitors? In this scenario, perhaps your competitor beats your production or delivery lead times. Both strengths and weaknesses tie into opportunities and threats.
Opportunities
In considering opportunities, we need to think about what external factors exist that can build up our strengths and contribute to the organization. For example, there might be a tax incentive in doing business in a certain market segment. Perhaps there’s an entirely untapped market or new technology that would interface well with your product. Maybe you need to increase social media marketing. Ultimately, you’re asking, “what existing external conditions are in place to help achieve a goal?”
Threats
Conversely, when assessing your external threats, you’re asking, “what external conditions are present that would cause damage to the goal?”
You should always consider your desired outcome in combination with your SWOT analysis. If you want to increase profitability for example, you will want to consider what opportunities align with your company’s strengths in ways that increase profitability and what weaknesses leave you open to threats that might derail progress toward the goal.
Your company’s strengths are what set you apart from your competition and make you successful – focus on them! Focusing on your strengths should be a primary focus for execution toward your goal(s). Be aware of your weaknesses, but do not make them your primary focal point.
The SWOT analysis is a great exercise to compare against a goal or business plan.
The questions below can help guide you through how to conduct the PESTLE analysis. It’s important to remember that the categories in this analysis are everchanging.
Political
Here you identify high-level aggregate concepts: Is there an election that’s about to take place? Any upcoming legislation that might increase tariffs on imported or exported goods you need to run your business? What does the tax policy look like?
Economic
What is the economy doing? Growing or shrinking? What does unemployment look like? Is it up or down/increasing or decreasing? What about the CPI (consumer price index) or inflation? How is that affecting buying behaviors?
Sociocultural
What consumers segments are able (and want to) purchase your products? Is that segment growing or shrinking? What does the educational system look like right now? How are social values changing?
Technological
What is new in the industry? Do you recognize any outside technologies that might be a good fit for your business? What is a big up and coming technology (e.g. A.I.) and how might that affect your business? How can automation or data analytics change your business landscape?
Legal
Here you identify specific laws: Are there any copyright laws, incorporation or patent laws that need to be taken into consideration? What about consumer protections laws that could affect your production?
Environmental
How could weather and your geographical environment affect your business or industry? If you import or export goods to a country that is being hit by a hurricane, how could that affect business? How does your behavior as an organization affect the environment? Is it sustainable? The latter is a big buzz topic – be prepared!
RESULTS
What comes next after you complete your SWOT-PESTLE analyses? There are a few steps you can perform to get the most out of your analysis findings and results.
You may notice some correlation between your findings using each analysis method.
Classification is key. Since both analyses are complimentary, take some time to see what concepts may overlap, what might be common between the two and what seems farfetched or highly improbable. If you’re the analytical type, you can build matrix tables to quantify and qualify your findings to see from a numbers and words perspective where you think your risks reside and why.
The next step involves peeling back a layer of the onion to establish more probable outcomes. Take your results and apply a Pareto analysis to them–also known as the is the 80/20 rule.
Here you ask yourself,” if I could choose 20% of my findings that would yield 80% of my results, what would the 20% be?” What you’re looking for is your top 20% of the results that will give you the greatest percentage return for your business. To help you determine what your top 20% is, ask yourself what your end outcome is.
What’s most important to you, or what is your goal? Do you want to be more profitable? Do you want to innovate more? Do you want to be an employer of choice? Ask the right questions to help you see the answer in your results.
Brainstorming is very important at this stage. Brainstorming involves thinking of ways to execute on your findings both in attaining your goals (or the 20% listed above) while avoiding, reducing, retaining or transferring the risk (be it threats, weaknesses or other adverse environmental factors).
For this portion, your best results and contributions will come from various places and people in your business. Remember, diversity equals richness. Get outside of your head, away from the people that think like you and look for more diverse opinions and experiences. You might even consider outside influences to give you more unbiased opinions.
The outcome in this section is to determine the good, the bad and the ugly, and dream up ways to deal with them!
RISK MANAGEMENT
I think it’s safe to say we all want to avoid adverse outcomes for our organization, especially if we can see them coming. Up to this point, you’ve learned how to assess your company and the environment. You sat down and organized your results and brainstormed to confirm your findings and some ways to avoid them. In this part of the analysis, we will look at a handful of classic ways to avoid risk.
We can call them TARR.
CONCLUSION
Awareness is essential in business. You must do your best to be aware of your inner and outer strengths and weaknesses and have a solid awareness of what’s going on in the world and how to interface those strengths and weaknesses to increase your odds of success.
Some questions you might be asking:
Where do I start? How can I know everything? What’s the cutoff point? How do I know when I’m safe?
You can’t be in all places at one time, but remember complexity is the enemy of execution. Keep it simple.
Write down your ideas, set them aside and start your analysis process. When you’re completed, compare your findings to your results and see how close you are–while being sure to avoid any confirmation bias in your work (in other words, don’t intentionally look for things that confirm your thoughts or beliefs). Alternatively, another method is to pick the 20% you think will give you 80% of the results.
Keep an open mind and include the expertise of those around you.
Performing any of these analyses will identify potential and present risk and provide you with the clarity you need to keep pushing towards success!