How much risk is really fear dressed in fancy clothes?
It’s easy to list 10 things that could go wrong for every one that might go stunningly right. Overwhelmed by negatives, we may fall into the default “no action” by studying more and more options or allowing other priorities to grab our attention. Are these negatives risks or ways of expressing our fears?
Risk is about uncertainty. How likely is it that we’ll achieve our goal and what happens if we don’t? What are the specific threats and how can we overcome them? These are questions we can answer, leading to actions we can take.
Fears, visceral reactions to future possibilities, might be reactions to threats or general concerns about making changes. If heeded, they can freeze our ability to think and act.
Many of us work to protect what we have, rather than actively seek what we want – thinking there is safety in the status quo. Standing still, though, is really not an option because stillness is an illusion. Movement and change are our natural state – the attempt to avoid them is fraught with risk to the well-being of individuals and organizations.
Shining the light on our perceptions of risk can reveal pathways for achieving our goals. Answering the key questions below sets the stage for success:
- What do we want to achieve? Does this reflect our current circumstances? How we can reconcile any conflicting priorities?
- What do we need to know to make good decisions about how to proceed? What relevant information can we access quickly? How can we include a variety of data and opinions?
- How can we measure progress and any changes in risk … then make any necessary course corrections?
Don’t be fooled by fears legitimized as risks. Knowledge can neutralize fears, reduce risk and uncover opportunities so you can move boldly toward your goal.
Cogito ergo sum. (I think, therefore I am) This famous quotation and the drawing of a brain section are from RenÃ© Descartes.
RISK DEFINES WHO WE ARE
If you have an image in your mind that risk management is a negative subject, always focused on bad things, you need to read Mumsipus Revisited by Felix Kloman and experience the humanity of the man who believes that “taking risk is the defining element of human existence.”
Kloman’s update on Descartes’ famous quotation is “perilitor ergo sum,” I risk, therefore I am. Life with no risk would be sterile and dull. It’s a clichÃ© to say that risk and reward go hand in hand. It’s ironic, then, that the common perception about risk management omits the positive aspect to focus only on the negative. Kloman argues persuasively that risk management addresses both situations.
The essays in this book are from a 15 -year period since 1974 during which Kloman was editor of the newsletter, Risk Management Reports. You can order a copy from Seawrack Press.
The essays offer many thoughtful insights about the nature of risk and the discipline that has grown up around it.
The essays are organized by themes (chapters)– a few of which are noted here:
- History of risk management
- Issues in risk management (including a discussion of broad public policy issues)
- Risk communication: difficulties in this area and why it’s so important
- Insurance (Kloman is a critic of the industry that provides a tool for “sharing risk.” His views may be of interest to insurance regulators, and other regulators who oversee specific-purpose “captive” insurance plans)
- Catastrophes, the ultimate challenge for risk managers and regulators.
Kloman’s authority as a commentator stems from the perspective, independence, clarity of thought and humanity he brings to every essay. He’s been an practitioner and respected commentator throughout the development of the risk management profession: it’s a young profession; He reads widely and shares his sources; He loves good writing and his writing reflects the obvious care that he takes; And, his passion for risk management reflects his values and conviction that this discipline can improve outcomes for society.
It’s worth reading just to discover what he considers to be valuable. In the risk literature field, Peter Berstein’s book Against the Gods: The Remarkable Story of Risk is but one example.
The title of the book, Mumpsimus Revisited, makes reference to the story of a monk whose erroneous use of latin in the Mass was of little matter to him.The story is a reminder that we need to revisit our assumptions, especially as they relate to risk.
There’s a review in the November 8, 2007 New York Review of Books of a book by the Turkish Nobel laureate Oran Pamuk, Other Colors: Essays and a Story. The reviewer quotes from an essay by Pamuk:
It is by reading novels, stories, and myths that we come to understand the ideas that govern the world in which we live; it is fiction that gives us access to the truths kept veiled by our families, our schools, and our society; it is the art of the novel that allows us to ask who we really are.
In another section, the reviewer again quotes Pamuk, “an imaginative novelist … can look directly into the center of things the way that only children can.” The child’s view is unconditioned by adults who may not see the obvious, or if they see it may have good reasons for keeping quiet about it. You’ll recall in the story of the Emperor’s Clothes that it was a child that revealed the veiled truth about the not so veiled Emperor, that he was buck naked. Continue reading
This is a book that offers the opportunity of an education. There are so many interesting tangents — they’re a bit like hyper-links that’ll take you into another world, the world of someone who has thought deeply and has experienced a life that’s anything but average. And to be sure this book is not about what’s average.
Nassim Nicholas Taleb argues that history is dominated not by the predictable but by the highly improbable. Before Europeans discovered the black swan in Australia, the world in the northern hemisphere believed there were only white swans. In fact, the expression “it’s a black swan” was a way to make a point about something being impossible. However, improbable and consequential events do exist outside our normal spheres of reference. Understanding the kind of impact these events can have on your plans, for good or bad, and being prepared is the central argument of this book. Taleb offers good advice. Continue reading
By Connie McCandless
For regulators in all jurisdictions, it’s the uncertain behaviour of people that’s the root of many difficult problems. People and uncertainty go hand in hand. All the possibilities of what can happen haven’t been considered, nor can they be.
People, whether they’re part of the system of regulation or the regulatees, may be defiant or cooperative, disinterested or informed, incompetent or proficient, dishonest or honest.
It’s always a shock to discover dishonesty in a system that demands just the opposite. In my hometown of Toronto, it was shocking to learn that lottery ticket sellers have been defrauding jackpot winners. So in Ontario, The Ontario Lottery Commission is about to be regulated.
Human behavior is a key risk variable. Regulations that are intended to promote desired behaviors often have unintended negative consequences. To achieve their objectives, regulators are advised to employ a variety of controls and incentives consistent with the rich possibilities for how people may respond.
Is this an opportunity to explore, develop skills and confidence? Or, is it unsafe?
In everyday language the word risk expresses our fear about something bad that may happen. We choose not to do something because there is “too great a risk.”
Felix Kloman who is the recently retired editor of Risk Reports has a simple and clear definition for risk that it is simply “deviation from the expected.” It has both positive and negative faces. I like this because, clearly, positive ways of living are important for us as individuals. And in an organizational context, positive action is also vital.
Business people express the idea about the need to take risks; allowing a business the opportunity to fail so that it can achieve more. The “risk taking” of business captures an aspect of the positive side of risk, perhaps inadvertently. It at least recognizes that all business endeavors (opportunities) entail uncertainty (risk) and that value can’t be created without taking on the opportunity.
So what does this mean for regulation which is focused on preventing events that may cause harm? Certainly, regulators need strong strategies to prevent the worst from happening. However, it’s useful to be reminded of two certainties: 1) the risk or uncertainty concerning future events can’t be eliminated; 2) future events can go forward in a negative direction or a positive direction
We all need to understand how we can influence future events in a positive manner.