Wee Kim Wee School of Communication and Information Division of Knowledge Management K6213 – Knowledge Management Technologies “Fusing Knowledge Management practices into Traditional Risk Management – Moving towards a person-centric approach” A Unilever case study Submitted By Ronit Naor Tal (G1101786J) Thangavelu Muthu Kumaar (G1101765E) Venkataramanujam Kannan (G1101791L)
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“Fusing Knowledge Management practices into Traditional Risk Management – Moving towards a person-centric approach” A Unilever case study
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Wee Kim Wee School of Communication and Information
Division of Knowledge Management
K6213 – Knowledge Management Technologies
“Fusing Knowledge Management practices into Traditional Risk Management –
Moving towards a person-centric approach”
A Unilever case study
Submitted By
Ronit Naor Tal (G1101786J)
Thangavelu Muthu Kumaar (G1101765E)
Venkataramanujam Kannan (G1101791L)
Members Contribution Peer Evaluation
Thangavelu Muthu Kumaar KM frameworks and RM
framework fusion and
conceptualization
=
Ronit Naor Tal Unilever interview and
Enterprise tools in
Unilever that can be
associated with RM and
KM
=
Venkataramanujam Kannan Risk Map and KM
Actions that can be
associated to manage risks
in Unilever
=
Table of Contents 1. Introduction .................................................................................................................................... 5
2. Theory of Risk .................................................................................................................................. 5
3. Traditional Risk Management ......................................................................................................... 6
4. KM and RM fusion and Conceptualization ...................................................................................... 6
4.1 SECI Model - KM as an enabler of RM .......................................................................................... 6
4.2 Identifying the Risk flow by relating to K-flow in KM Systems Process ........................................ 7
4.3 The impact of fusion – KM and RM in the organization ............................................................... 8
5. Unilever as a Case Study ................................................................................................................. 8
It knows it must run faster than the fastest lion or it will be killed.
Every morning in Africa, a lion wakes up.
It knows it must outrun the slowest gazelle or it will starve to death.
It does not matter whether you are a lion, a gazelle, or an enterprise.
When the sun comes up, you’d better be running to meet the needs of the day.”
A thoughtful extension of Dan Montano’s (1985) quote is to reflect the competitive nature of
present day’s enterprises. The essence of winning or even survival rests on maximizing the
value of the corporate assets. The organization should not only stand to create value and
defend their assets, but also proactively manage the risks in the competitive landscape,
operating environment and markets. Risk management involves measuring the identified
risks in all dimensions and mapping with its prime axes – likelihood and business impact.
The traditional solutions of risk management has a financial and operational focus
implemented by the executives and managers often to cut down costs of low priority tasks,
divest, change their product or service pricing, change their operating mechanisms and
practices. The paper recommends a broader solution to manage risks in a Knowledge
perspective seeking into identification of inadequate knowledge at process and strategic
layers of communication, collaboration and cognition, which in turn can aid in better risk
management. This paper in the latter part offers insight of the conceptualization with tools
and technologies that can be directly attributed to Risk Management (RM) and Knowledge
Management (KM) in a globally present and one of the most successful enterprises in the
world, ‘Unilever’. It starts with the measurement of risks with a ‘Risk Map’ and transitioning
into a ‘Knowledge Map’ with Know what’s and know how’s for risk mitigation, then
applying Knowledge Management practices to act upon and learn the broad spectrum of
Knowledge in processes and technologies with a long term focus to proactively manage the
risks in the future. Knowledge Management is the central theme for the day to enhance
learning, thereby eliminating risks and maximizing performance strategically and proactively.
In this study, Traditional RM framework is fused with KM frameworks to create a better RM
solution – Risk Map Framework is fused with Schwandt’s Organization Learning Systems
Model (OLSM) and associated with traditional KM theories – SECI and KMS process.
1. Introduction
“Risk comes from not knowing what you're doing” (Warren Buffett, 2007) – As the quote of
the billionaire’s investor and the CEO of Berkshire Hathaway states, risk is where the action
and reflection is unaware of the business intent. This means risk arises from the act of ‘not
knowing’, the lack of knowledge. The traditional risk management practices has a financial
perspective balancing the costs, revenue and investments or an operational focus acting upon
the processing mechanisms, standards and alternatives. The objective of this study is to
demonstrate the knowledge perspective of risk management by fusing RM and KM with the
existing KM technology stack. Traditional RM uses a data-centric analysis tool integrated
with the Decision Support Systems (DSS) (Olszak & Ziemba, 2003). This is a Bottom- Up
approach looking more at numbers to gain insights for action. Dougherty argues that
‘Knowledge is about people, not databases’ (1999). A right strategy is with a mix of Bottom-
Up and Top-Down approaches guides in a positive way of managing risks in a Person-Centric
approach with appropriate use of technology (Neil, Allen, Woodhead et al, 2009). Knowledge
Management is a people centred process driven by learning strategies - people to documents
as in ‘codification’ and people to people as in ‘personalization’ (Hansen, Nohria & Tierney,
1999). A fusion ERM and KM principles can set a road map to efficient risk management,
driving organizations with the power of learning and doing, hence improving the business
performance with the right strategy and vision in long term.
2. Theory of Risk: Risk literature separates ‘risk’ from ‘uncertainty’ and defines the risk as a measurable
probability that something will happen. In common usage the words ‘risk’ and ‘uncertainty’
are often synonymous (Lupton, 1999 p9)
According to Ghosal, Any Multi National Corporation faces four major risks -
Macroeconomic, Political, Competitive and Resource risks (1987).
Macroeconomic – Wars and natural calamities, uncertain and random movements in wage,
interest and exchange rates.
Political – Policy actions of national governments, legal and regulatory mechanisms
Competitive – uncertainty about competitor’s actions or development of competitive
technology
Resource – lack of human resources and technology capital
This classification is adopted to categorize the risks in the Unilever case study in the later
part. Hansson argues that: risks are inextricably connected with interpersonal relationships.
They do not just ‘exist’; they are taken, run or imposed (2000 p4).
3. Traditional Risk Management:
The traditional technocratic and objective approaches of managing risks tend to lose the
‘person’. Alaszewski and Alaszewski (2002) argue that taking a narrow leader centric
approach to risk will contribute to common people’s disempowerment in the organization and
a sense of irresponsibility during a crisis. The business executives and leaders should insist
and allow employees to be exposed to the strategic and operational risks that an organization
is facing and motivate them to contribute proactively to manage risks with a long term
perspective. “Risks are results of actions that are neither necessary nor impossible; they are
contingent” (Thompson, 1985) and depend on human actions. Solving risks involves
identifying what is important to a person from his or her own perspective and find out
appropriate solutions (DH, 2007 p4). Power (2004) calls for ‘intelligent’ risk management
without swamping managerial attention and relying on independent critical imagination
characterised by learning and doing rather than rule-based processes. Most Enterprises driven
by technology now have increasingly high focus on financial and operational capability when
it comes to managing risks. The Enterprise Risk Management approach should carry a social
construction where there is a long term vision of knowledge embodiment in processes and
practices.
4. KM and RM fusion and Conceptualization:
4.1 SECI Model - KM as an enabler of RM:
KM and knowledge management systems are based on the interactions among people, which
correspond to the movements from tacit and explicit knowledge to tacit and explicit
knowledge on the individual and organizational level (Nonaka and Takeuchi, 1995).
“Risk Management is frequently not a problem with lack of information, but rather lack of
knowledge with which to interpret its meaning” (Marshal and Prusak 1996). Once a new risk
is identified it implies that new knowledge is required (Fourie & Shilawa 2005).
The process of RM can be applied in SECI model as follows –
Socialization: RM involves a complex decision making process with collaborative efforts of
stake holders, vendors/suppliers, employees and executives and share a common risk
modelling experience and risk knowledge discovered by socialization. (Tacit to Tacit)
Externalization: Codification of risk knowledge and case based RM practices, lessons learnt
by the managers involved in the risk modelling process. (Tacit to Explicit)
Combination: The discovered risk knowledge is combined with existing risk knowledge and
best practices. Reclassifying and synthesizing the existing knowledge is to ease the
application in RM in the future. (Explicit to Explicit)
Internalization: Learning and understanding the risk knowledge to change appropriate work
flow in the process under risk or implementing a holistic RM model considering all the
internal and external risk events of the organization. (Explicit to Tacit)
4.2 Identifying the Risk flow by relating to K-flow in KM Systems Process: Bosua and Scheepers (2007) investigated for insights in the knowledge flow mechanism and
inferred that “formal and informal SNs (social networks) complemented by a shared network
of integrated information and knowledge-based artifacts are determinants for effective
knowledge sharing in complex environments.”
In RM context (a complex environment), KM processes act as enablers to improve the
efficiency of teams in assessing the risks and sharing a common decision experience by
effectively collaborating with people involved (Wang et al., 2006).
Knowledge Discovery: A new risk implies new ways of measurement and the potential
events and workflow in the organization that could be affected in such a situation. Fusing and
applying the existing risk knowledge can help in understanding the new or current risks.
Knowledge Capture: RM requires the captured risk knowledge to be codified, stored,
organized and indexed within the knowledge base.
Knowledge Transfer: RM is a cross disciplinary, inter-departmental action requiring a
holistic view to support individuals, organizations, inter-organizations, business partners to
learn and transfer risk knowledge to develop the capacity to manage them.
Knowledge Application: Risk knowledge can be embedded into new product development,
converted into competitive advantage by adopting the lessons learnt and best practices.
4.3 The impact of fusion – KM and RM in the organization:
The fusion considers a collaborative RM decision making process considering users, stake
holders, suppliers or vendors associated where there are more chances of solving the risk with
a broader view. It encourages a positive and informed risk management practice with a
‘learning’ based KM approach. Most importantly, it contextualises human behaviour along
with the process and revenue level impacts. It develops a learning culture. It motivates people
to codify case based RM approaches, lessons learnt and new risk knowledge discovered. It
creates a shared risk modelling experience and helps us to adapt to dynamic changes in the
business. Tolerable risks in turn stimulate creativity and innovation. Social networks, portals,
blogs and communities can be a platform for collaboration and group think to probe deep into
issues that the organization is facing and the viable solutions validated and suggested by
peers. This eases the thrust on top management by opening up the new way of looking at
risks, by adding value to employees, empowering them to act on risks. However, the
solutions need not be necessarily taken for implementation of RM, but the employees learn
and it will be visible in the next cycle of product development or process management.
5. Unilever as a Case Study:
About the organization:
Unilever owns many of the prominent brands in the food and beverages (Knorr, Lipton,
Hellmans, Bertolli), detergents (Cif, Comfort, Omo) and personal care products (Axe, Dove,
ponds). It is a dual-listed company consisting of Unilever N.V. in Netherlands and Unilever
PLC in United Kingdom. Both Unilever companies have the same directors, and they operate
as a single business. The current non-executive Chairman of Unilever N.V. and PLC is
Michael Treschow while Paul Polman is the Group Chief Executive.
There are more than 171,000 employees around the world working in Unilever (as of 2011)
and the worldwide turnover in 2011 was €46.5 billion. Unilever products are sold in over
than 190 countries. €1 billion invested in R&D worldwide in 2011. They are already 13 years
as the food Producers sector leader in the Dow Jones Sustainability.
*Unilever Enterprise tools associated with Risk Management and Knowledge Management
mentioned in this paper are based on an interview with a senior finance associate in Unilever,
Singapore (The tools are confidential and can be used in the context of this term paper only)
Corporate assets – Intellectual Capital:
Unilever assets can be broadly classified into human, structural and relational capital and