The New Risk

In the world of risk management, even the most basic things can get confusing.  When it comes to basics, it’s hard to think of a notion more basic than what ‘risk’ is. 

One of these is the distinction between a risk and the event that triggers the risk.  You can see a little bit of the confusion through the risk management standards.  The AS/NZS 4360:2004 standard considers risk as ‘the chance of something happening that will have an impact on objectives'.  Clearly, risk is closely related to, if not actually, an event (‘something happening’).

Compare this with the newer ISO 31000:2009 standard, which is not only an international standard, but also succeeds the AS/NZS 4360:2004 (i.e., the next version of AS/NZS 4360:2004 is ISO 31000:2009). Here, risk is ‘the effect of uncertainty on objectives’.  It is no longer an event.

Now, this very succinct definition also manages to be very confusing -- there are various discussions in LinkedIn about what it actually is trying to say. 

What then, is the difference, between an event (or a circumstance) that brings a consequence versus a risk the brings a consequence? The key to understanding risk is to focus on the word ‘objective’. Start with the objective. What do you want to achieve? This is the starting point. Literally, without an objective, there is no risk.

Once you have determined your objectives (there can be more than one), think of the various outcomes that deviate from that objective.  The third step is to consider the consequences of those various outcomes.

Let’s work through an example.  Suppose you have a job interview, and you identified your objective to be: arrive at the appointment on time.  What are the various deviations?  You can arrive 5 minutes late, 10 minutes late, 30 minutes late, 10 minutes early, and so forth.  What is the consequence of arriving 10 minutes late?  How about 30 minutes?

You can the look at the different possible events, circumstances, or situations that can cause the deviations: traffic, getting lost, underestimating the time needed for travel, forgetting something and having to go back, running out of petrol, having a car accident, etc.

After identifying possible causes, analyse them and implement mitigation plans for the ones that might be more likely, such as traffic, or underestimating the travel time required.  By mitigating the various events, you are reducing the chances of not being able to arrive on time.

You can also mitigate the risk.  But since risk is not an event, you cannot mitigate it from happening.  Instead you mitigate its consequences. So you mitigate the possibility of the deviation from occurring by addressing the events that can cause the deviation, and you mitigate the consequence of the deviation.

	Old World	New World
Risk	An event, or situation, or circumstance	The deviation from your objective
Consequence	The impact of the event, or situation, or circumstance	The impact of the deviation (regardless of what caused the deviation)
Risk Event	An event that brings about the risk	An event that causes a deviation

Woody Allen’s Success Formula

How can you be successful?  How can you attain what you want?

According to film director Woody Allen, “80 percent of success is showing up.” What did he mean? Perhaps he meant that luck plays a considerable part in success (80%).

In my own life, I look back and I see many instances where a successful phase of my life can be traced back to being began at the right place at the right time.  It is not enough of course to be at the right place at the right time.  You have to be the right person. But let me focus on being at the right place.  The place does not have to be a physical location.  Being at the right place also means having the right qualifications -- being there.

For example, if there is a need for an experienced PRINCE2 lecturer, someone who has that experience is already at the right place, using my additional meaning for being there.  They only need to show up at the right place physically.

What am I trying to say?  Maybe it's that in order to be able to show up, you need to plan ahead:

• Determine where you want to show up.  Let's say you want to work for NASA as a rocket scientist.
• Plan how you will show up.  What can you do to achieve the status of someone who CAN be a rocket scientist.
• Execute your plan for being there.  Work hard.
• Show up. Be sure to present yourself at every opportunity for being hired as a rocket scientist

Remember:  It's not the most qualified who gets the job; it's the most qualified among those who show up.  It's not those who show up who gets the job; it's the most qualified among those who show up

Notes on Harold Geneen’s‘Managing’

Harold Geneen was the legendary CEO of the legendary conglomerate ITT.  He wrote a book many years ago, titled "Managing"

Far too often, the solution taken to solve performance problems is to restructure.  But the structure is almost never the culprit.  Basketball teams all have the same structure, but consider the disparity in performance between teams, even between teams whose members are individually comparable in talent.  Geneen has this to say:

“On paper, the structure and organization of ITT was not very different from that of most large corporations in the United States.  But an organizational chart is really only a piece of paper, a static dumb thing, that identifies a chain of command of people and functions.  True management begins only when you put all these people together, functioning together, in a vital, human interrelationship so that the company performs as a single team, driving onward toward the goals set by the chief executive.  These human interrelationships, in all their facets, are what differentiate one company from another..  On paper, one company can appear to be exactly like another, and in reality be completely different.  The important policies, decisions, and activities of a company are those which deal with people, not functions.”

On managing risk:

“Good management is more than solving problems as they arise. Good planning must include the anticipation of problems that are likely to arise and the steps to be taken to avoid them.”