Why Risk Should Be On Our Minds
Updated: Jan 28, 2021
Why should risk be on our minds? This question is one that many organizations should be considering. Organizations tend to recognize risk as it is associated with any form of regulation or governance; but, tend not to utilize a risk management process in day-to-day decision making. As organizations consider methods to improve efficiencies, these decisions are typically based on the end-desire in mind. This is not altogether bad. However, there should also be considerations of all the risks that are present that have the potential to lead to delays, discouragement, and often failure in these initiatives. We could say it is human nature; wanting things to happen fast and seamlessly. Unfortunately, this is not how things always work and we should be making the management of risk our top priority when setting out on any journey that drives organizational change. This blog is another of more to come regarding the "organizational mindset".
Risk is part of our everyday life. We may not recognize this, but we actually willingly or unwillingly accept risk all the time. To put this into context, let’s consider some of the data that applies to most of us in a day-to-day type scenario. One activity that most of us engage in on a regular basis is driving or riding in a motor vehicle. There are many risks associated with driving that we accept unknowingly. Statistically in the US in 2018* there was a 1 in 106 chance of being killed in a motor vehicle accident. Driving in a motor-vehicle has much more risk associated with it then flying in a commercial aircraft. In the US in 2018*, there were actually too few deaths to even calculate the odds. There are many variables that play into this, but one of them being the attention the airline industry places on risk within the context of safety and reliability. We don’t always think of all the effort and time that has gone in to ensuring safety and minimizing the impacts of risk when we fly. When it comes to our own motor-vehicles, we might even be a bit negligent on basic maintenance. And even with that factor we often still don’t even consider the consequences this might have on our safety and the risks that might surface during our commute. I guess the thought of falling out of the sky versus a wreck on the ground has influenced our perspective on things. In many cases, people fear flying over driving because there is little considering the risk management that has a heavy presence within the airline industry.
We do not always consider the risks when we have something that is set in our minds. Think about it, if we plan a trip to drive to visit the beautiful mountains and the coastline of British Columbia, we typically pick the dates and all hop in the car and go. In this instance, we consider the reward at the end, but we fail to consider the risks that could present themselves while we are on the journey. If we better understood these risks, we might have determined that flying is a much safer method to get to the coast. To some degree, we might simply make the choice of driving to the coast because of the financial savings versus flying. But rest assured, there is a reason for the cost of flying. A lot of this is based on the risk management that is implemented in order to ensure the proper maintenance and reliability are in place.
If we consider this scenario of travel and apply it to business, we can see some parallels. Especially when we consider the different perspectives of risk as they exist within any organization. If we were to utilize a process of risk management, we might recognize a better way of reaching our goals because we are able to invoke mitigation strategies to prevent realized risks from occurring. We should always be seeking the most economical ways to do things, but not without incorporating a risk management process. This helps ensure that our economical option does not become more costly because we failed to see all the overlaying hazards. Risk management should be a part of not only our general assessment of things, but we should consider it when we set all of our business goals.
By assessing risk, we might recognize that our current organizational culture is not ready for change, or that we might have too many resource constraints to reach success on time, on budget, or even at all. In a sense, this helps us recognize other options or the need to have mitigations in place to prevent or lessen the chances of failure. This also helps recognize how much we should implement as opposed to the giant leap which includes everything. It does make sense to take a "stepping stone" approach to improvement which allows an organization to become better prepared for change and embrace it. Risk should be a mindset within any organization. This mindset helps ensure that the risk of doing or not doing something is considered first. As opposed to dealing with the impacts of risks as they inconveniently occur; potentially causing setbacks and in some cases catastrophic outcomes. Risk management is a fundamental key to success as it provides a clear way for our organizations to determine direction, control growth, and implement a new state of the art changes to keep us in the game.