innovation_people-onthego_creativecommonsI’ve heard it said more than once that Lean / Six-Sigma applied only to manufacturing and not to business processes like risk management. However, I have found that these five Lean / Six-Sigma tools help manage risks, including enterprise risks, more effectively. When used correctly, they also support better decision-making, and provide powerful insights into complex risk problems that allow organizations to make intelligent decisions about mitigation rather than just accepting insurance as a strategy.

Value Stream Mapping (VSM)

A loss usually occurs when a process is a) not followed, b) is inadequate, or c) does not exist. The VSM is a powerful tool to map out processes and then to determine where in those processes waste or failure points exist or where losses occurred. I once used this tool to map the M&A process of an organization, much to the bewilderment of the investment bankers, to better understand why several of their acquisitions did not meet expectations. The results led the company to record earnings on acquisitions not long after the project was concluded.

Ishikawa or “fishbone” Diagrams

Often times, there is little to no knowledge of all the factors that go into a particular risk event, process, or product. Diagraming the people, environment, tools, and other elements that feed a particular risk or loss event becomes a powerful enabler when deciding the best method(s) for handling a risk.

SIPOC Diagram

Supplier – Input – Process – Output – Customer diagraming further helps organizations to understand the succinct elements of a risk as well as the best methods for managing a risk. During a workshop I was leading for a cargo company, the president stopped me mid-stream to ask me about the tool I was using. I told him it was a tool called “SIPOC.” He later shared with me that he now uses the SIPOC tool for every major decision he makes.


It’s a simple root-cause-analysis tool but it helps to focus on managing the real issues that can cause a risk to become a loss. Consequently, it can also help to understand how a loss event occurred so that the organization can avoid any future occurrences. Simple but effective!

Affinity Diagram

When surveying risks across the organization, it is crucial to “affinitize” them or group them under the main risk categories that the organization uses. I look for common themes and trends and this tool is very helpful in understanding those leading indicators. It is also useful for internal auditors to help them target their surveillance planning in those areas that have an increase in risks and exposure. One word of caution, don’t assume that a risk with a single occurrence of n=1 should be ignored and that the highest frequency of risk should be given the most attention!

Are too many surprises impacting your bottom line negatively? Insurance premiums increasing because of unforeseen events impacting your business and driving losses? Is your risk management ineffective, nonexistent, or only insurance focused? Contact us for a free consultation and learn how we help companies turn losses into opportunities, reduce insurance premiums, and make risk management a value producing function:

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