Managing Your Public Risk

. . . cause of many losses.   (The polite description!)  Assumptions are a constant paradox:  some seemingly trivial ones, can cause catastrophic losses, yet we have to make them all the time.  Are assumptive losses inevitable?  Not if we keep a few preventive thoughts in mind.

We often make assumptions because information isn't available or we lack the time to get the required data.  But overconfidence, ignorance, naïveté, laziness and stupidity can also be factors.  Regardless of motive, we end up guessing about outcomes, based on mere perception of the probabilities. And those perceptions can easily be faulty.  Assumptions are essentially declarations made, explicitly, implicitly or even subconsciously, without the supporting proof that we would normally demand.  They are simplistic and value-laden. And they can be dynamite!

It’s not just this insidiousness that make assumptions risky: they can actually pack three punches in one: first, the consequences of the original faulty assumption; second, the consequences of all subsequent decisions based on the original (flawed) assumption; third, with each additional assumption, we muddy the waters and are less able to establish clear cause and effect. With many permutations and combinations possible, it becomes very difficult to learn from our experiences.  Unwittingly, we continue taking risks that we wouldn't knowingly take.  This is a hallmark of many big losses. 

There are formal techniques for flushing out critical assumptions. Since we don’t have space to cover them here, see a summary at www.cadmus.ca/assumptions.htm 

So, how can we protect ourselves from assumptive losses? 

1. Start projects only with clear, specific objectives
2. Anticipate major upcoming decisions and the critical data you’ll need to make them.
3. State any assumptions explicitly and question those of others, especially if unstated.
4. Ask lots of questions and encourage others to do so.  (e.g. "How do we really know . . . ")
5. Seek the company of people who view the world differently – diversity can flush out assumptions.  
6. Be precise – words are the building blocks of thought, language and law.  Their interpretation often creates many subtle assumptions. 
7. Reinforce a common understanding of key words and important organizational values.
8. In a dispute, welcome debate and keep it focused on surfacing hidden assumptions.  
9. When things start going wrong, check your assumptions.
10. Make assumptions about the motives and interests of others at your considerable peril.  

Risk Management Reports, written and published by risk guru Felix Kloman. This excellent monthly newsletter covers the broad spectrum of risk.  The archives are filled with a wealth of useful data, gathered by one of the world's leading minds in the risk management business.  Available in paper or electronic form through www.riskreports.com.