Risk Management

It's a good video.

it is important to understand the concept and to think things through before jumping into solutions.

Some of the reasons that those who attempt to employ accepted risk management methods fail include the following:

1. Trying to support preconceived conclusions
2. Excessive reliance on limited statistical data, and failure to apply reason
3. Inexperience--never having known the things that can actually happen
4. Wishful thinking
5. Inadequate understanding of how potential mitigation techniques actually work
6. Relying too much on old thinking ("fighting the last war")
7. Failure to test and challenge underlying assumptions

Just a few, from one who has seen all of those.....

One of the biggest issues I see in the real world:

Preferential risk management. This is my own term, it means that a person either ignores or exaggerates certain risks based on their own preferences. For example, a person who is a gun nut might focus more on crime risks, or risks from dangerous animals while largely ignoring health risks or risks from disease while another person who is interested in fitness might focus more on health-related risks. It's easy for people to explain/rationalize why they have the focus they do and why they don't pay attention to other risks that might be more likely, or more likely to have very negative outcomes, but the bottom line is that it's far too common for people base a large part of their risk management on what they WANT to prepare for and not what they NEED to prepare for.

When assessing risk, it is important to find a reasonable balance based on information, not based on preference.

It doesn't make sense to focus heavily one one type of risk while ignoring other risks that are equally (or more) probable and carry the same or more severe consequences.

Another common issue I see in the real world:

Trying to mix the assessment and mitigation. People assess that a risk needs to be mitigated, so they start working on a mitigation plan. The plan gets difficult (or they perceive it is difficult) so they decide on a course of action that doesn't mitigate the risk and justify the inadequate plan based on the low probability of the risk. It is a waste of effort to implement an inadequate mitigation plan. If an adequate plan can't be put in place, then it makes sense to not implement a plan at all, but it doesn't make sense to go to the effort to implement a plan that can't do what it's supposed to.

For example: Imagine that a person assesses that the risk of a flat tire is sufficient to warrant a mitigation plan but finds that they are unable to carry a spare tire or a tire repair kit and a portable pump. So, they satisfy themselves with carrying a jack and leave it at that, justifying the inadequate plan by saying that the chance of a flat tire is small in the first place.

One might say that having a jack is better than nothing, but in reality, it makes no sense to be able to jack up the car if there's no provision for replacing or repairing the flat.

If the plan is obviously not going to solve the problem it's designed to solve, there's no point in implementing it. And the fact that the flat is unlikely is a red herring. That would be a reasonable rationale for not implementing a plan, but it doesn't provide rationale for having a plan that won't solve the problem. In fact, there is no reasonable rationale for implementing a plan that won't do what it's supposed to.

If you've assessed that a plan is required, make sure you implement a mitigation plan that will actually solve the problem it's intended to.

JohnKSa said:

If you've assessed that a plan is required, make sure you implement a mitigation plan that will actually solve the problem it's intended to.

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Absolutely!

Good Ol' Boy said:

In our current society there is zero risk management.

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Why would you say that?

Good Ol' Boy said:

We've completely passed that and folks are on to risk avoidance.

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When potential rewards do not significantly outweigh potential risks as mitigated, risk avoidance is by far the preferred approach to risk management.

Good video. It does a much better job of articulating these things than I seem to be able to do. (I'm too wordy. Go figure.)

A few more thoughts about risk management...

As Jeff's video indicates, it is a primary analytical discipline that is to be applied in anything that the Department of Defense does.

It is also anything that public accountants look at when they evaluat the adequacy of the systems of internal controls that are legally required in all publicly held companies.

It is an essential part of investment management everywhere.

And on and on.

The basic methods are exactly the same, everywhere, as those outlined in the video that Jeff posted.

As it happens, I co-authored the risk management process documentation that was imposed upon one half of a major US corporation. That was over two decades ago.

My partner had received his Doctor of Philosophy degree from his work in the field.

We taught the subject to everyone, high and low.

Results were mixed, at best.

Why?

I've thought about it a lot.

Here is what I have concluded.

Unless one actually knows the territory--has been around the block--has made mistakes one has seen others make them--rote playing around with risk management techniques is just going through the motions.

Those who have never obtained FAA certification for an airliner, obtained the release of hostages, built a bridge, sent crews to the Space Station, contained an oil spill, built a reactor, developed an approved drug, or engaged comparable tasks, OR STUDIED IN GREAT DEPTH WHAT OTHERS HAVE GONE THROUGH IN SO DOING, cannot be relied upon to develop or implement a viable risk management plan for any of those activities.

But very few people can have had very much in the way of actual experience in the things that we discuss here in ST&T.

So, what to do?

One thing is to perform simulation--combat simulation, jury simulation, calling 911, shoot/no shoot situations, recognizing potential threats, and so on.

Other gaming methods can help, too.

One of our moderators used to recommend sitting through as many trials as possible.

And then, challenge every assumption, assume different outcomes along the way, and revise the strategies as appropriate.