So why don’t organizations (i.e. the managers and leaders making the decisions) do a more complete job of assessing risk in the decision making process? There are two main reasons:
Today’s Glamour Trumps Tomorrow’s Proactiveness:
Asking “what if” is not as glamorous as demanding “what now.” Organizations have a bias towards action and firefighting – they reward people for fixing the problem not preventing one.
Think about it – resurrecting the website back up to full service will get more internal press than taking action to prevent it in the first place. Getting the big client back is more interesting than reporting on action that prevented you from losing it in the first place.
Risk Assessment Is Rarely Linked to Meaningful Actions:
Many leaders and managers don’t know how to evaluate risk in decisions – they are so busy selling their alternative or chosen action that risk never gets considered. Past work with an insurance company had me sitting in front of 12 actuaries discussing decision making and risk management. When I asked them to define risk they replied – “its complicated.”
Practically speaking its not complicated. Risk is about two things – the likelihood or probability of an event happening and the impact or seriousness it will bring if it occurs. We just need a simple way to inject this thinking into our business decision-making before rushing ahead. Our mothers were excellent risk managers- when is the last time you crossed a busy street and then looked both ways? – this is simple risk management in action.
Both of these organizational truisms will never go away no matter how much effort is applied. But if you follow the short question checklist list outlined below you will be one of the few that will be able to build stronger risk management into your decision making process. And importantly be a better decision maker. Before going ahead with any decision – Look at your top performing alternatives or courses of action and ask - if we go ahead with the alternative:
1. What could go wrong? – Write out the top two or three risks
2. What is the probability and impact if that risk did occur? – Select the high probability / risk combinations
3. What would cause that risk to occur? – Remove the cause before taking action
4. What can we do to lessen the risk or manage it if it did occur? – rework your alternatives or implementation actions to address this
Every decision inherently has some risk level and you can never eliminate all risk. But by simply asking these questions before jumping to action you will make better decisions and eliminate many risks that are routinely overlooked.