I am a risk management consultant, an occupation that most people know little about. Most know what a consultant is — someone that asks for your watch to tell you what time it is. Then the mention of risk management causes people’s eyes to glaze over which is an improvement from when I worked for insurance companies and the people backed away from me. Many think of risk management as managing your investments or some complex process that no mere mortal can comprehend. But risk management is really just making good decisions, perhaps common sense on steroids.
We all practice risk management every day when we lock our doors at home, wear a seat belt, put your child in a car seat, take an umbrella, wear a helmet while riding your bike and so on. You have identified the risks of locking or not locking your doors — you may be robbed, vagrants move in, you may be attacked, or nothing bad happens. Based on your analysis of the risks you decide a course of action — you lock your doors but you may also decide to purchase better locks, install a home security system, start a neighborhood watch program, get a dog or any other options to protect your family and belongings. Over the course of time you review your home risks and make adjustments — if crime in your neighborhood increases you may go for the home security system or even move to a safer neighborhood. That’s risk management. You may have gone through a conscious decision making process considering your options or just decided to get new locks after your neighbor was robbed.
For an organization the risk management process may be a little more complicated but the desired outcomes are the same — to maximize the positive outcomes and minimize the adverse results. The practice gets more complex since an organization is a complex system with competing goals and objectives with limited resources.
Organizations like people practice risk management without realizing it. Every policy and procedure in place is a risk management technique to manage a risk. Your personnel manual offers guidance in treating your employees fairly, financial controls strive to avoid someone from stealing your money, hiring practices improve the chances of hiring the right person for the position.
The trick to effective risk management is to know what questions to ask to identify the risks you are facing. Once you have identified the risks, analyze the possibility of the event occurring and the outcome if it does happen. If there is a high probability that the event will occur (a hurricane hitting Florida) and the possibility of a significant financial loss then that risk should get your attention first. This is where a risk management consultant can be helpful — they know the right questions to ask, how to analyze the risks and help you decide what course of action to take. Without the appropriate technical knowledge or guidance you could spend a lot of time rearranging the deck chairs instead of avoiding the collision or evacuating the ship quickly.
So risk management doesn’t have to be tricky or complex you just have to be willing to think about what can go wrong with your organization. The event can be too much of a good thing (too many clients) or someone getting hurt or some other adverse outcome. You then decide what you can do to prevent the event from happening or be ready when it does occur. Not rocket science but tricky.
(c) 2008 Croydon Consulting, LLC
May be duplicated, with attribution, by charitable organizations.