Airbus Focuses On Price of Risk is the lead for the June 10 Wall Street Journal story by Daniel Michaels. In the article Hans Peter Ring, the Chief Financial Officer of Airbus parent company EADS, is quoted as saying “[Airbus] must now do a better job of putting a price tag on the risks inherent in their airplane programs.”
He continues on to say, “We are in a high-tech, complex business, and there is a lot of risk in our business. That won’t change. The question is how to price risk. Obviously, in some cases we didn’t price it right.”
And finally Mr. Ring said EADS has now changed its approach toward assessing risk and is applying this approach to new programs.
It is refreshing to see an experienced business executive of a global company squarely identify the challenge – managing risk.
While senior managers have many responsibilities, ultimately they succeed or fail based on how well they take risks. If they focus on eliminating risk from their business model, returns will suffer. If they risk poorly, the company will suffer. Their core job is to take risks – well.
Companies in industries with long lead times face even greater needs to manage risk effectively. While a sophisticated and efficient consumer products company may be able to go from concept to market in less than a year, the time from concept to market in aerospace can be many years or even a decade. Unforeseeable changes during that process make managing risk well particularly daunting.
As stated in the article: The challenge is common to most businesses, but is particularly acute in aerospace, where multibillion-dollar programs take years to develop and face huge unknowns.
By correctly identifying where Airbus has done poorly in recent years, Mr. Ring is significantly increasing the chances that will change. As with so many challenges in business and life, correctly identifying the problem is the first step to success. Misidentify the problem and you’ll be chasing the wrong rabbit.
Will Mr. Ring’s vision and awareness guarantee success at Airbus? No. Will it significantly increase the chances of success? Yes.
Risk cannot be eliminated nor should that be the goal. It can be utilized and managed. That is the path to success – corporately, professionally and personally.
