In “The Lean Turnaround. How Business Leaders Use Lean Principles to Create Value and Transform Their Company” the author, Art Byrne, discussed three management principles that are the foundation of Lean: (1) Lean is the strategy; (2) Lead from the top; and (3) Transform the people. These principles also apply to risk management.

Lean is the strategy. That is, Lean is the business strategy for continuous improvement. To get better results, you have to fix your processes. Get rid of the waste and make continuous improvements to every value-added operation. However, a Lean strategy is not just cutting costs or reducing inventory (how many companies do you know do this?). Lean must become part of your company culture to deliver value to the customer.

Lead from the top. The senior leadership (including the CEO) must be actively involved in the Lean process. They must know the details of the company intimately so that they can help identify waste and set goals that encourage employees to apply Lean principles. The more that is known about the value-added activities, the more waste that can be eliminated and the better the customer value. When employees see senior leadership actively involved in the Lean process, they are more inclined to support the Lean efforts.

Transform the people. Byrne notes that for continuous improvement, the best ideas come from the employees who do the work. A better and stronger company results when management listens to its employees. Too many companies say they listen to their employees, but in reality, ignore their recommendations. A Lean company does not. A Lean company promotes teamwork which results in an employee-valued work environment. Getting employees involved in the elimination of waste will help transform the company culture to one of continuous improvement.

These three management principles also apply to risk management. A company’s risk management program should involve a system for planning, organizing, leading, and controlling the resources and activities that an organization needs to protect itself from the adverse effects of accidental losses. A Lean Risk Management program involves the efforts of individuals to efficiently and effectively assess and control risk in order to minimize the adverse effects of losses or missed opportunities. A Lean Risk Management program adds value and helps to ensure that losses or missed opportunities do not prevent a company from meeting its goals. Senior management support is essential to an effective and efficient Lean Risk Management program. To gain that support, a risk management program should promote the organization's overall goals.