The art of communicating risk information to stakeholders will always remain one of the Risk Managers most important challenges to solve. It does not matter how insightful your analysis is if you can’t convey your findings persuasively. Data visualisation is one method which can be applied to enhance understanding and decision-making processes, yet it presents unique challenges. This week's newsletter explores the nuances of data visualisation in risk management and provides practical tips for overcoming common hurdles.

1. The Challenge of Overwhelming Data Complexity

Risk management data is often voluminous and interconnected, mirroring the complex nature of risks themselves. The challenge lies in simplifying this complexity without omitting crucial details. How do you decide what data to present?

Action Steps:

• Focus on the core message and eliminate any data that doesn't support your narrative—while ensuring transparency, especially concerning potential issues.

• Avoid data overload. Concise, focused reports are more effective than lengthy documents that boast of actions rather than informing.

• Report by exception. If full dashboards are unnecessary, highlight changes and focus on areas showing risk degradation.

2. The Challenge of Everything Being Middle-Range

Risk assessments often cluster around the median due to a tendency to avoid extremes. This can dilute the prioritisation process, making it difficult to distinguish between the urgency of different risks. If you have a system of Very Low, Low, Medium, High, Very High; or 1, 2, 3, 4, 5 you are very likely to get a Medium or 3 answer.

Action Steps:

• Use an even number of scoring options to force more decisive evaluations, avoiding the middle-ground bias.

• When you decide if something should sit in the third or fourth column of a six column graph straight away you improve your prioritisation. Now leverage this.

3. The Challenge of Misinterpretation of Visual Data

Visual representations can sometimes lead to misunderstandings or misinterpretations, especially when numbers are involved. A high percentage of unsatisfactory controls might seem alarming but what if it was three out of five? Managing the uplift effort of three controls seems much more manageable than 60%.

Action Steps:

• Present both absolute numbers and percentages to provide a fuller context.

• Ensure all visual elements like legends, labels, and scales are clear and consistent to guide interpretation correctly.

• Engage with stakeholders through regular reviews to ensure visualizations remain clear and effective.

4. Discourage the Bias of High-Rated Equalling Bad

Any risk, issue, incident rated High or Very High will always invoke concern. However, it is not always bad. Organisations may work in high risk industries and have to accept some level of of risk. Recognising and responding appropriately to these can actually demonstrate effective risk management.

Action Steps:

• Emphasise a high-risk rating is an opportunity for prioritisation and resource allocation, not just a sign of trouble.

• Use detailed explanations to contextualise why certain risks are rated high and why it may be acceptable.

• Encourage a risk-based culture not a risk-concerned culture.

5. The Challenge of Risk Impacts Being a Range Not Single Figure

Risks typically have multiple potential impacts, making it misleading to represent them with a single figure or risk rating. Risks will have a range of impact and reporting a risk as a static dot can oversimplify the situation.

Action Steps:

• Use range-based visualizations, like risk tornado diagrams, to illustrate the spectrum of potential impacts.

• Be transparent about the variability in risk impacts, explaining the range and its implications clearly.

• Be candid and transparent about the risk information you present explaining its implications clearly.

6. The Challenge of Static Reporting

Static reports can fail to meet the diverse informational needs of different stakeholders. Dynamic, interactive reports allow users to delve into the details that matter most to them.

Action Steps:

• Implement dynamic reporting tools that allow users to customize their view and focus on the information they need.

• Provide comprehensive training on these tools to ensure stakeholders can fully utilise the capabilities offered.

• Construct your system whereby one piece of information flows through the system so extracts and reports always have the most up to date information without manual manipulation.

7. The Challenge of Using Red, Amber, Green (RAG) Indicators

While RAG indicators provide quick visual cues, they can oversimplify complex data and create misleading impressions about risk levels. Sometimes Amber is okay but human brains are wired to think Amber is a problem.

Action Steps:

• Move away from traffic light systems and use different shading. Be very open that Amber, or its replacement colour, is not necessarily calling out a problem.

• Supplement RAG indicators with numeric or textual data that provide context and detail.

• Regularly recalibrate thresholds to reflect current risk landscapes and ensure they provide accurate guidance.

Conclusion

While data visualisation in risk management comes with its set of challenges, the benefits of enhanced clarity, improved stakeholder engagement, and better decision making are invaluable. By adopting best practices and leveraging the right tools, risk professionals can transform complex data into actionable insights.

Closing Thoughts

Reflect on what changes you can make to your data visualisation to improve your risk management practices. Contact us for a detailed consultation. Equip your business with the tools to not only see but also effectively respond to risks.