Guest Post by Ed Perkins (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
While we look at risk-based decisions and making decisions under uncertainty, these approaches all have one basic assumption – that the participants in these processes are doing so consciously, with eyes open and with an appreciation of the risks and consequences involved.
The unconscious approach
However, the most common form of risk management practice is the unconscious approach. People generally just do not want to know of or think about risks.
Unless the consequences of risk are staring them in the face. For example, we all will die, but we don’t think of it at all until or unless we get some bad news or our health declines or it otherwise becomes obvious that we won’t go on forever.
Then with the consequences at hand, we think about risk and risk management.
Becoming less risk tolerant
We speak of the ‘innocence of youth’, and ‘living like there is no tomorrow’. As we get older we become less risk tolerant – but what does that mean?
We have obligations; we have commitments – a wife, a mortgage, loans, children to support, etc. so we are more aware of the consequences of not being employed, of not being healthy, of being foolhardy, etc.
We go to the store to get a paper or some bread or milk. We focus on the objective, we do not think at all about the inherent risks that this activity may entail. We get in the car, or maybe we walk down the street.
There are other vehicles or other pedestrians. There are intersections with unknown actors going by.
We cross, after looking both ways as we were taught, but we don’t give it a second thought after that.
There may be physical risks in entering the store or inventory risks that our item may not be available, but we ignore them unless they actually occur.
So how does this translate into risk-based thinking, risk assessments, and risk management?
If unthinking (normal) behavior is to ignore risk and/or pretend it does not exist then that will be the response to expect when implementing risk in an organization. The ’risk-deniers’ will show up.
Their tendency will be to downplay any risks – ‘since when did that ever happen’, and to brush off any mitigation plans that appear to require money or resources.
So the stage is set for the power struggle between the prudent and the unconscious.
But the risks don’t care.