CORPORATE RISK MANAGEMENT

Corporate Risk Management



Managing Corporate Risk Through Knowledge Management (Intel Case)

Introduction

Some contend that knowledge management has already “been done”, and that further elaboration of its benefits and continued advocacy for expanding its application within the modern organization is passé. However, in an era of corporate scandal and expanding global supply chains, knowledge management is witnessing a renaissance as a key tool for managing corporate risk. In fact, far from being “done”, in many ways it is only now, when effective risk and incident management has become so integral to corporate well-being, that knowledge management has truly become a mainstream and strategic management tool. This is simply because a company cannot manage its risk effectively if it cannot manage its knowledge.

A quick review of the relationship between risk and knowledge management makes it clear why this renewed interest in knowledge management tools and techniques is so important. Consider, for example: a 16-month old child dies from drinking bacteria-laden apple juice after the company ignores advice concerning the product's safety. A slaughterhouse finds its employees dumping waste chicken blood and entrails into one of Mississippi's main water systems. A children's safety seat manufacturer fails to reveal to the public dangerous defects in its car seats, cribs and strollers that kill two babies and injure more than 300 others.

Risk management is knowledge management

For a growing number of knowledge and risk management experts, the fact that corporate leaders remain ignorant about harmful, illegal, or reputation-threatening activities within their own organizations provides the most compelling case yet for better knowledge management in the modern company. After all, many of the issues that organizational leaders complain prevent them from anticipating and reacting to a corporate ethical crises, are the same issues that knowledge management experts (see for example, Nonaka and Takeuchi, 1995; Ashkenas, 1995; Chawla and Renesch, 1994) have been wrestling with for years.

The rationale for applying these knowledge management techniques and systems to a broader corporate ethics and risk program is straightforward:

Sensing and responding to risks in an organization is very much dependent on corporate intellectual capital - i.e. the knowledge and judgment of employees at all levels. Employee insight - in terms of anticipating potential accidents, a personal recollection from a similar incident in the past, a story swapped weeks ago around the coffee machine that can alert a supervisor to an impending manufacturing line accident or environmental spill - all can keep a disaster from occurring.

However, that knowledge is much less effective if left to filter through a management structure in a haphazard way. It needs to be actively managed and encouraged, so that employees see concern for ethical or legal violations as part of their everyday responsibility.

Accordingly, key company decision makers need to mobilize this employee knowledge and the vast amount of information available concerning potentially reputation-threatening issues in a way that will allow them to “sense and respond” quickly and correctly to developing risks. To do this they will need to monitor ethical sourcing activities of overseas suppliers, as ...