Growth may require restructuring

Restructuring is sometimes necessary. I have written about the risks of growth and asked whether the structures and procedures in your organisation continue to be fit for purpose when growth occurs. If the business changes, the risks will change. At least the probability and potential severity of each risk will change. Therefore you need to review all the controls in place. You could include a review of the structure of your organisation.

How does restructuring affect Risk Management?

A business should have three lines of defence against risk.

  1. The manager of each task or activity
  2. Internal checks such as risk managers, health & safety officers, audit, quality control
  3. Independent persons such as non-executive directors, external audit,

You may need to strengthen one or more of these. All should have access to top management whenever they need it. Does your structure provide all three lines of defence and are they adequate?

JHM Risk ManagementA man with a question mark, possibly considering restructuring his business.

A man with a question mark, possibly considering restructuring his business.

When do I not recommend restructuring?

Restructuring is not an end in itself or a solution to every problem. I have come across situations where an organisation has a particularly inefficient or ineffective unit within it and top management think they can improve it by changing the lines of reporting. Perhaps they divide the unit into two, or amalgamate it with another. If you don’t do anything else, such as replacing inefficient staff or retraining them, all you get is inefficiency spread around (or alternatively, concentrated).

When does restructuring work best?

When it is one element of a package of measures and when everyone involved understands the purpose of the changes.

Don’t just move a problem around: tackle it!