Welcome to my blog! Read my musings on associations, nonprofits, risk, strategy, leadership, management, insurance, my dogs and other things of interest. This posting mulls the passive attitude many of us take towards managing risk. Hope you enjoy and come back often.
As a risk management consultant, call me crazy but I think risk assessment and mitigation (aka risk management) should be a part of all business decisions especially strategic ones. However in my experience most associations and nonprofits don’t do a very good job with incorporating risk management into their planning process or daily operations. Oftentimes an event, program, service or activity is deemed “too risky” without the benefit of careful analysis. Even if the activity is risky you may be able to mitigate the risk to make it acceptable. On the flip side an association can take a course of action that really is too risky or a poor fit with its mission.
Why do people and organizations have such a hard time assessing risk? Risk by its nature as the possibility of loss or harm has negative contentions – we don’t want to be wrong, fail or cause harm. But risk taking is necessary to move forward and be successful. Without a structured process to assess and mitigate risks you fall victim to your often flawed perceptions of risk. John Ross in his book The Polar Bear Strategy recounts a tale of being on an Arctic expedition with five other people when they happened upon an area recently visited by a polar bear. The group discussed its options in the event of a polar bear attack but couldn’t decide what precautions to take. “Out on that tundra, because the six of us couldn’t agree on the severity of the risk of meeting a bear, we neglected to come up with a strategy. Instead, paralyzed, we chose the worst possible course of action: to do nothing at all.”
Before seeing signs of the polar bear, Ross’s group had not discussed its bear plan although encountering a polar bear in the Arctic is not an unusual risk. The group had a rifle (because the bush pilot required them to take one) but kept it stored in a duffel bag and it is unclear if anyone had any expertise shooting a rifle. In retrospect a dumb idea not to be prepared but they all lived to tell the tale and John wrote a book about risk. So how can we avoid making a similar mistake as we run our organizations?
Risk management is a format to identify and analyze risks followed by selecting ways to mitigate the threats. We still tend to abdicate our business and personal risk decisions to fate. We tend to be optimistic people we don’t like to think about the bad things that can happen. Plus the process seems rather tedious and boring. But stopping to determine what could go wrong, evaluate the probability of an event occurring and identifying ways to manage the risk can be interesting exercise. Risk management helps you identify the potential obstacles and create ways to overcome the problems rather having a bad experience that derails or destroys a new initiative. Consider it as a part of your planning process.
All those Boy Scouts can’t be wrong with “Be Prepared.”
So what’s your polar bear strategy?