Guest Post by Malcolm Peart (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
“That’s a Red Flag!” goes the cry from some when something amiss is recognised. However, many project participants don’t realise that their Project sails through a sea of flags and that, on some occasion, the flags can be read as red by somebody at some time.
In a similar nautical vein the Roman writer Ovid once poetized “The man who has experienced shipwreck shudders even at a calm sea“. While written some 2,000 years ago it is as true today as it ever was and a reminder to us all that risks lurk everywhere. Some risks may not be identified, let alone assessed and may go unnoticed until they strike. We need to be aware and vigilant and avoid a complacent belief that a risk register is the be all and end all.
No matter what risks we identify and what we think or forecast regarding their probability or consequences, risk is risk, risk happens, and happen it does. Projects are rarely fair-weather sailing and when it comes to risk management, we need to keep a weather eye open for changing situations and avoid the blindness that colour-coding risks can bring.
For some Project Managers they think their role is to handle risks reactively when they happen rather than manage them proactively; after all they need to be seen to be actually doing something and fighting fires. Being prepared requires being informed and managers need to keep their finger on a project’s pulse as well as keeping an eye on the weather that affects the Project; just like the Boy Scouts people need to “Be Prepared”.
Poetically speaking, weather-eyes are the domain of sailors and shepherds with a red-sky at night portending future delight (*) and the probability of good weather. This ‘eye’ doesn’t require a Tar or flock-attendant to be a meteorologist constantly checking barometric pressure changes but indicates that their vision should be more holistic. They need to bring some focus on things outside of their direct control so that appropriate action may be taken in a controlled manner.
Keeping an eye on the prevailing situation shouldn’t occupy the whole of a Project Manager’s or a Project Team’s attention but they should maintain a background awareness of changes to a project’s environment, albethey subtle. That is not to say that checks shouldn’t be carried out regularly and frequently; checking a sunset must be complimented by checking sunrises too; after all a red sky in the morning should be headed as a warning of potential bad weather (**).
We can’t always rely on past trends or yesterday’s forecast as situations and environments, like the weather, can change quickly. Predicting the weather has become more predictable but, and even when armed with an arsenal of weather satellites and stations around the world our weathermen and women are not always right or are sometimes ignored. The consequences of being wrong or ignoring a forecast can be far reaching and as the Insurance Industry experiences to its dismay, even extremely unlikely events can, and do, happen.
In 2020 insurers experienced their fifth most costly year in terms of ‘natural catastrophes’ since records began and some US$81 billions were paid out for insured losses. These “Secondary Perils”, as they are termed, are related to flooding, landslides, hailstorms, storm surges, tsunamis and wildfires. The Insurance Industry have realised that a once quantifiable risk, the weather, is still unpredictable and associated risks can be as unappreciated and unplanned for as ever. The past can be the key to the present but may not necessarily be a good base to predict the future, hence risk assessments need to be rigorous and reviewed regularly; a leopard may not be able to change its spots but risks can change from green to red.
Colour Coding & Colour Blindness
In our risk management practices, and an ofttimes senior management obsession with simplification and boiling even the most complex of risk scenarios into a threefold categorization of ‘red’, ‘amber’, and ‘green’, we tend to focus on ‘red’ for ‘danger’. Then there’s a similar obsession with only focusing on the ‘top ten’ of the project risk radar. This focus allows those lesser amber risks to fly “under the radar” while green risks run the risk of being ignored completely.
Ignoring anything doesn’t make it go away and risks are no exception. Even if a risk is not identified or recognised or incorrectly assessed the risk will still be ‘the risk’. If a risk has been understated then any arbitrary and initial colour-coding could well be deuteranopic; what was once green becomes red and we suddenly understand the consequences that red-green colour blindness brings.
These low-probability-high-consequence events lurk under a thin veneer of green but, as time passes and some tide or other turns they then reveal their true rubescent nature. But it’s not just a singular flag that is red and we may suddenly find the entire project is surrounded by a stormy crimson sea.
And when the storm rages how often do we hear, “Any port in a storm”. This easy option may be the quick decision and the first solution is chosen given the myopia if seeing the nearest straw to clutch at. Or perhaps the brave Project Manager decides to ride the storm hoping for calmer waters and, despite being unaware of the risk initially, can at least be seen to be doing something, even if it is only reacting.
Low-probability-high-consequence risks are often ignored in favour of higher probability events and they are fly below a project’s risk radar and, stealthily, catch people off-guard. The surprise attack is always a possibility.
For the risk-aware they focus myopically on their colour-coded rankings unaware that one woman’s green may be another man’s red. And for the risk addicts, risk is something that happens to other people and nothing can go wrong and everything has a rose-tinted hue.
But risk, like the weather, changes as do trends and predictions. Risk registers, as with weather forecasts, are not always right and need to be reviewed and refreshed and a project’s weather-eye needs to be kept peeled.
Perhaps we should heed the British mathematician John Edensor Littlewood’s Law which states that a person can expect to experience events with odds of one in a million at the rate of about one per month. A low risk doesn’t mean no risk, you may hope for green pastures but must have a plan for those red mornings.
* red sky at night, this means that the setting sun is sending its light through a high concentration of dust particles. This usually indicates high pressure and stable air coming in from the west and good weather will follow
** red sky in the morning, can indicate that a high-pressure system (good weather) has already passed, thus indicating that a storm system (low pressure) may be moving to the east. A morning sky that is a deep, fiery red can indicate that there is high water content in the atmosphere and possibly of rain.
Malcolm Peart is an UK Chartered Engineer & Chartered Geologist with over thirty-five years’ international experience in multicultural environments on large multidisciplinary infrastructure projects including rail, metro, hydro, airports, tunnels, roads and bridges. Skills include project management, contract administration & procurement, and design & construction management skills as Client, Consultant, and Contractor.
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