Sunday, October 14, 2012

President Obama and Executive Responsibility to Mitigate Risk

Every modern day executive is concerned about selecting the right policy for the organization.  Associated with policy selection, planning the implementation of policy and mitigating risk associated with that policy is an equally important responsibility.  In other words, if a plan is at risk of not going well, the executive has to ask what can be done to put the policy back on track?  When a policy is adopted and not after, good executives ask what can go wrong.  They then ask how to place corrections in place at the time the policy is adopted, not later when things go wrong.  Good executives anticipate what can go wrong and insure against it at the onset through their actions.  This happens before things can go wrong.

This is a skill that President Obama has not exhibited in his first term in office.  He should have asked a series of “what-if’s” with each new policy he put before Congress and implemented in the bureaucracy.    What could be done if the Stimulus Program failed to stimulate?  What could be done if Obamacare failed to contain costs?  What could be done if gas prices double?  And there are other policies where mitigations were not identified.

One of those policies is President Obama’s mid-east policy that was announced in Egypt in 2009.  When he adopted it, an obvious and foreseeable question to ask at the time is what should happen if the mid-east perceives the policy as weak?  One obvious and foreseeable mitigation is to strengthen US embassies in the area.  Any executive of any worth would have protected the policy from any potential risk to the downside at the time of the decision.  When requests for increased security from the field were received would be too late. 

A potential risk that awaits us in the future is what happens when China no longer wants to buy our debt.  When China transitions from an export economy to a consumer economy, there is a good possibility that they will need an inflow of cash from their investments.  There is also the possibility that China may use our debt as a strategic weapon in case we need to compete with them in the Pacific for influence over some critical issue.  This type of risk analysis is sufficient cause us to restrain our growth in fiscal debt.  The question is what mitigations should be put in place to deal with this risk.  This is a President Obama question.

Dealing with uncertainty through risk mitigation is an executive responsibility.  It’s basic.