Risk as a management discipline gets a poor press. Like a hapless government agency it often appears that it has been set up to fail, due to unrealistic expectations of its power and effectiveness. Why is this so?
Risk is an estimate of a future outcome and is therefore a reflection of a level of confidence in the future. Risk management is to an extent an oxymoron because the future cannot be managed, this is part of its problem. Another is its focus on the past to predict future loss or harm based on what has gone before. We are genetically programmed for self-preservation which drives our fear of loss.
Do you have a ‘glass-half-full’ attitude to life or ‘glass -half-empty’ attitude? The former tend to be optimists who see pleasure in the remaining half pint, whereas the latter tend to be pessimists lamenting the loss of the first half. Because risk management focuses on loss aversion and hazard avoidance, risk experts tend to exhibit a glass-half-empty mentality. This restricts capacity for imagining a positive future which glass-half-full thinking would encourage.
Does this matter? It can lead to what is known as ‘Maginot Line syndrome’ (MLS) a belief that a system of defence in place to preserve continuity is adequate because it addresses a previous threat. It is found wanting when a new threat overwhelms it that had not been anticipated. The UK response to the Covid pandemic was based on an assumption that any future pandemic would take the form of a known flu virus and not a new variant as Covid-19 proved to be. The 2017 risk assessment ignored the warning signs of SARS and MERS which showed that new variants required consideration as Canada had found in 2012.
There are many examples of MLS that demonstrate systemic failure in thinking about risk. It is not about the state of preparedness but the lack of imagination in predicting future outcomes. In 1942 Singapore assumed any attack would come from the sea not the land, so when the Japanese invasion came from an unexpected direction, the defence was quickly overwhelmed. As risk is essentially about anticipation of possible future outcomes, risk thinking needs an injection of creative imagination if it is to be effective.
Nobody says that predicting the future is easy, most predictions are either lucky or wrong, but risk management as a discipline is set up to fail if it is considered primarily as one of preventing business interruption, loss or harm. Risk decisions involve an imagined future, we just need to have more imagination about possible futures, especially as we explore the impact of the current pandemic on our future lives. Risk is an integral part of an imagined future, but in the absence of robust estimates or projections into this future then the risk controls put in place will always be facing the wrong way.
Written by Garry Honey, SAMI Associate and founder of Chiron Risk
The views expressed are those of the author(s) and not necessarily of SAMI Consulting.
SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.
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