September 11, 2012
Don’t take the risk! He is a very risky person to work with. It is time to take risk off the table. We want to live in a world without risk. This investment is risk-free.
Risk management is focused on reducing risks so when we find ourselves speaking on risks, it tends to the negative, precautionary, protective … We forget about the benefits, opportunities and value that risk taking involves. We forget that everything we do each day, from the moment we put our first foot out of the bed, involves risk taking. Why are we so negative and defensive about risks when risk taking is so ubiquitous?
What makes us human is that we can make mistakes. What makes us morons is that our strategies for risk management (setting policies and regulations) happen after the mistakes occur – mostly reactionary and post-precautionary. Nassim Nicholas Taleb, in his book The Black Swan, ponders that if a regulator had introduced legislation prior to 9/11 to have locks placed on all airline cockpit doors, he would have been hated, publicly humiliated and would probably have become a sad, lonely person.
We give credit to people who fix things after they have broken – not the risk managers who act in advance to avoid things breaking. When risk management is done properly, no one notices (today I celebrate that there were no major plane crashes or factory explosions … yesterday was a good day as well). Risk management for dummies (literally) is to make sure that a bad event doesn’t happen again (it does nothing to prepare us for events that have never happened before – the unknown unknowns). Don’t get me wrong – regulating to ensure that a bad event does not happen again is better than pretending to ignore these recurring events (think of delays in regulating on smoking and speed limit enforcement in high accident areas), but it is just not what risk management should be about.
We often see risks after the fact, with hindsight, and regret not acting differently. This analytical regret is what we often confuse (transfer) as negativity – it is the risk that is perceived to be evil, not our failure to manage it. If we trip on a step, we are angry that someone put a step there, and not that we were too preoccupied to notice it. If a person gets hurt on the step, we initiate plans to have the step removed (regardless of the benefits of the step). Instead of step, put in the words: chemical, pesticide, sweet snack, alcohol … you can come to the same conclusions.
Some risk management measures are common sense (seatbelts, bike helmets, moderate drinking and healthy diets) – getting people to manage them has been a generational challenge. People have the right to be stupid and this is the real effort for risk managers. My strategy is that telling good stories and portraying proper icons is a necessary long-term first step. Scaring people might have some short-term success (fear is a good initial motivator), but our capacity for reason is quite adaptive and bad behaviour tends to be resilient. The identified risks are the problem and our inability to properly manage them is overshadowed by our superficial victimisation (let us all pity the overweight person as we attack the food industry that must have exploited our vulnerabilities).
Precaution! We are told this is the noble tool to fight off evil risks. The risk management process has lost itself in our recent obsession with the precautionary principle. Regular readers of this blog might recall my disdain towards this political and anti-science tool (as interpreted by activist ideologues in the EEA), but here is one further criticism. While it seems preventative, the precautionary principle is mostly used in reactionary situations (where reality is skewed by events, reason interrupted by emotion). If the cows go mad, it is time for precaution. If the banks drive the economy over a cliff, it is time to regulate. And then we applaud our precautionary legislators (and forget they were asleep at the wheel when they should have been managing the risks in more calm, reasonable situations).
I like to illustrate the risk management situation as the process of finding the best way to get across a very busy street. We should conduct a risk assessment (speed and volume of traffic, distance to cross, nature of drivers, crossing locations, lights …) prior to managing the risks to find the best means to reduce the risks if necessary. The precautionary principle is usually brought in if we had not properly assessed how to manage the risks and generally when we are half-way across the street and very afraid (and where turning around is just as dangerous as going forward). The precautionary principle rewards the stupid for getting them to turn around and forget about the benefits of crossing the street. Like children, we look at the mess we got ourselves into by not thinking and heading into the traffic and get angry at someone else (drivers, road designers) for forcing us to be post-precautionary. A proper risk manager, on the other hand, following a risk assessment, would look at the street and find the best way to reduce exposure to the hazards (as low as reasonably achievable – ALARA) while still enjoying the benefits found in crossing the street.
I don’t beat my wife!
Environmental NGOs have discovered a great game. It is fact-free, easy and very effective. As most of their target companies are concerned about the negative connotation the public (their consumers) have toward risk, NGOs know that it is easy to get companies’ PR consultants to respond to their “concerned accusations” (read: fear mongering) with denials. Take their two decades of GMO attacks. NGOs like Greenpeace or Friends of the Earth can fabricate a potential GMO risk (reduced immunity, biodiversity, bees, … it doesn’t really matter what … just for fun, let’s fabricate a fear about GMOs and the threat to monarch butterflies!) knowing full well that industry representatives or scientists will be forced to prove them wrong – to deny that the NGO claims are valid.
Denial is the first step on a slippery slope to culpability. By denying something, I implicitly associate myself with that negative suggestion. In some public engagements, I have used a routine where I repeatedly deny that I beat my wife. After getting more and more animated about this and going on about the evils of wife-beating, the audience can only draw one conclusion: Zaruk beats his wife. The more we hear people say that GMOs do not contaminate nature (implicit point of acceptance: GMOs are not natural), the more we draw the conclusion they are contaminants. NGOs know this trick, use it readily, and, as I assume they really believe that the end (saving the planet) justifies the means, do not feel any moral unease about manipulating people or debates in this manner.
Rather than denial, why don’t we just put the risks on the table and tell people how we are managing them (or how they should)? Manage these risks and you can enjoy these benefits! This would require assuming people will think openly and have some common sense. This would require that we have trust in our regulators, companies, scientists. This would require that we have leadership and people willing to follow those with expertise. This would require a different world than the one we live in.
Author : David Zaruk