Joanna Makomaski

Joanna Makomaski is a specialist in innovative enterprise risk management methods and implementation techniques. She can be reached at riskletters@lrp.com.

Column: Risk Management

Beware of Buyers

By: | December 10, 2014 • 3 min read
Joanna Makomaski is a specialist in innovative enterprise risk management methods and implementation techniques. She can be reached at riskletters@lrp.com.

Let’s imagine we are looking to hire an entertainer for a children’s birthday party.

We have the infamous “Bobo the Clown,” who enjoys blowing up balloons and artfully making exotic animals from them. Then we have “Blade,” a skillful knife-thrower who performs high thrill acts of hurling knives at the perimeter of child volunteers, barely missing body parts.

Blade’s precision is near-perfect. The children are indifferent to who comes. They love Bobo and Blade equally.

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We ask both Bobo and Blade to give us their best price and contract wording for their services for an eight-hour day.

Bobo presents a colorful quote highlighting that he is adequately insured for third-party liability and is also trained in first aid.

For an eight-hour day, he would charge $1,000.

Blade presents a sharp looking quote as well. He too states he is well insured for third-party liability and knows first aid and CPR.

For an eight-hour day he would charge $500.

In the details of his contract wording, he explains that he also requires that his liability be capped at the value of his contracted services.

So who should we pick? Is it obvious?

The Latin term caveat emptor comes to mind — “let the buyer beware.”

In legal circles, it is a warning to buyers that the goods or services they are buying may be subject to “defects,” so without a warranty the buyer takes the risk.

In the corporate circuses that we work in, we see Bobos and Blades everywhere.

So why is it, with everything we know and all the near misses we experience, do I remain so frustrated?

And am I alone in this frustration?

I get it. Reducing cost is important to all organizations, but let’s do our cost accounting correctly, at least.

Too often, I see corporate procurement groups buying the services (or goods) from the Blades of our world.

Why? Why? Why?

Typical answer: because Blade was 50 percent cheaper. Really? Seriously?

Furthering my frustration is that by the time Blade’s deal reaches the hands of risk management, if at all, it is often too late.

The deal is done and now the organization must brace itself to pay for Blade’s handiwork and sliced body parts for years to come — less $500, of course. What a “great” deal.

All the while, our good-boy Bobo who did everything right is still trying to get his hat in the ring for some business.

I get it. Reducing cost is important to all organizations, but let’s do our cost accounting correctly, at least.

Purchasing organizations have to consider other decision drivers — like risk.

The key decision cost driver should always be the risk adjusted cost of having Bobo or Blade at the party.

Third-party risk is a rising concern for procurement departments.

But the focus tends to be with larger market-based risks caused by the increasingly globalized nature of supply chains or the rising use of outsourcing that could heighten business’ risk exposure.

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But I would like to see buyers sharpen their risk assessment pencils a bit more and procurement teams routinely account for product and professional liability risks when making purchasing decisions.

Quotes need to be calibrated to match all the caveats of vendors’ quotes and cost structures in order to increase transparency to the true cost before vendor selection.

Organizations that implement vendor risk management programs and evaluate third-party risk — where they can actively develop compensating controls or mitigations — are sure to help lessen the ugly business impacts potentially created by your Bobos and Blades.

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Column: Risk Management

Courting Job Candidates

Talent management risks can be exacerbated by a company's recruitment strategies.
By: | November 3, 2014 • 3 min read
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We all know the way to a company’s success is found within the people that it hires. We all understand that it is important to hire the right people for the right job. Good employees are the most precious assets of an organization.

Numerous books are written on effective hunting and attracting techniques, and on how to pull in talented job candidates once you’ve found them. But do we understand what top-shelf candidates are thinking of us as we are recruiting them? Is it possible they may be rejecting us just by virtue of how we have recruited them?

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It is not uncommon to learn that candidates decide not to accept offers simply because they found the whole recruitment process far too maddening. It was just easier to walk away.

A good recruitment process should attract the right kind of employee, the kind that you want in your company, with great knowledge, skills and attitude.

That same recruitment process is also a direct reflection of the operation and professionalism of your organization. Often, when organizations design their talent acquisition strategies, the daunting workload seems to leave them feeling stressed. But remember that feeling is nothing compared to that of job candidates.

Just because organizations believe they have found the perfect candidate, don’t forget there is a real risk that the candidate will not reciprocate those feelings.

Being recruited takes a heavy mental toll on candidates. We should conduct our recruitment process carefully and with empathy.

Starting with the job description — talented candidates know how to analyze job descriptions. If a job description is too vague, littered with corporate jargon or, more importantly, does not give a sense of what the candidate’s success will look like or how it will be measured in that role, you risk a huge strike against you.

Even with a dud job description, it is possible you may get the candidate to an interview. The candidate is likely doing it in hopes of supplementing what they did not learn from the job description or initial discussions with your recruiter.

We know an interview is like a first date. Both parties assess each other. We have to remember that for a good candidate, this is not their first rodeo. It is critical that the recruiting firm not come off as arrogant or not allow the candidate to talk in a meaningful way.

In many ways, a great candidate is in the position of power. So it’s best not to be subjugating. A good candidate usually has other carrots dangling in front of them and they know it.

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Even if the interviews go well, companies should be mindful of not introducing “hoops.” There is nothing worse than for a candidate to discover there are multiple hoops to jump through — drug tests, competency assessments, medical examinations, extended references. These things may be necessary but it’s best to inform candidates of these well in advance.

After the candidate survives the interviews and makes it to the offer stage, it is critical to give the candidate adequate time to produce documents and to consider the offer.

There is nothing is more nerve-wracking for a candidate considering a new job opportunity than to feel like you’re holding a gun to their head. Good candidates take things seriously. They need time to consider. Shortchange them here and you risk your candidate walking the other way.

Just because organizations believe they have found the perfect candidate, don’t forget there is a real risk that the candidate will not reciprocate those feelings. And he or she may leave you at the altar by virtue of how you courted them.

Joanna Makomaski is a specialist in innovative enterprise risk management methods and implementation techniques. She can be reached at riskletters@lrp.com.
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Column: Risk Management

Safe but Stifling

By: | October 15, 2014 • 3 min read
Joanna Makomaski is a specialist in innovative enterprise risk management methods and implementation techniques. She can be reached at riskletters@lrp.com.

Is doing the safe thing the way to have a better result? Or does it lead to your ultimate detriment? That’s a question worthy of an experiment. As for the results, you have them here in my golfer’s (or CEO’s) guide to risk management.

I love golf. It is truly a great sport. It is a perfect balance of risk and reward — a battle of mental and physical abilities.

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It is a game you play against yourself and within yourself. At the end of a day, you add up your score and know that you, and only you, own that score. There is no one to blame or steal the reward. It is all on you. I love that.

As of late, I started to focus on the impact of taking risks when playing. I wondered: If I were to take more risks while playing, would I score better? Would my risk-taking give me more rewards?

So I decided to conduct an experiment. In two rounds this month, I implemented two completely opposite risk strategies.

For the first game, I decided to play very conservatively.

I would lay-up if I thought I might get into trouble. I would use a lesser club off the tee just to keep the ball in play. While swinging, I only focused on striking the ball with an easy, smooth rhythm.

But does playing it safe and risk-free make you a winner in the long run? I played easy golf and scored well but for some reason I didn’t feel very satisfied.

My key objective was to consistently follow a process. I wanted to assure good form for each and every swing, every strike, every ball flight. I didn’t want to hit a stray shot, lose a ball, or exhaust myself beating the club into the ground.

For the next game, I went for the gusto. I took every risk I could. My focus was to make birdie on every hole. No, I wanted to make eagle on every hole. My objective was to sink every putt. Never leave a putt short. I didn’t care what my swing looked or felt like.

Indeed, I hit some majestic shots. Soaring, flying, drifting, fading, hooking, slicing, everywhere you could imagine. I lost nine balls that round and received nine penalty strokes. I was exhausted by the end.

I set my expectations so high that when I failed, I was angry and frustrated. The angrier I got, the harder I swung. The harder I swung, the less accurate I was.

When I compared the two games, I absolutely scored better by playing it safe. I hit the ball easily and it went where I expected it to go. I didn’t lose any balls and therefore didn’t have any penalty strokes. Because I set my goals with the process in mind, I didn’t care that I didn’t make par on every hole.

But does playing it safe and risk-free make you a winner in the long run? I played easy golf and scored well but for some reason I didn’t feel very satisfied. I had this nagging feeling that I could have done better. I didn’t feel as though I pushed myself. I played the easy route. Less risk meant less reward.

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In the full throttle game I played as hard as I could and my voracious risk appetite caused me to score quite poorly. But somehow that form of play left me with more optimism. I imagined harnessing my best holes and repeating them for 18 consecutive holes next time. It was aspirational play.

So when it comes to defining risk appetite, I realized it is a truly tricky concept. In business, we routinely have to balance risk and reward in the pursuit of organizational perfection — the aspiration of all leaders — the perfect round, the perfect deal, the perfect presentation, the perfect opportunity.

If we don’t strive to be the best we can be, if we settle for mediocrity we may never maximize our potential.

And we may never win the green jacket.

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