Defining your risk threshold and knowing when you are
nearing it, is the crux of managing risk.
Alas, the onset of risk is not always apparent.
Moreover, some managers tolerate excessive risk without taking action.
When losses don’t follow immediately, we are lulled into taking even
more risk. The mere absence of loss
doesn’t imply a lack of risk. Far
An analogy: wet roads dramatically cut the grip of your
tires. Above 60 mph, you are likely hydroplaning, your tires not even touching
the road. Many people don’t
realize how little braking and steering control they have, only because they
often don’t have to brake or steer suddenly.
(In another irony, anti-lock brakes, air bags and large vehicles also
make us overconfident.) The ultimate deception is that everything seems OK until
it’s much too late. You may be at
the edge of your risk threshold -- or far beyond it -- before you realize you
have no control. A small mistake
made by a driver up ahead can put you to the test.
The results can easily be catastrophic, if not deadly.
The situation at work is similar. Without the pain of recent loss or the ability to foresee its many consequences -- we tend to take ever more risk. Under financial, production or other pressure, the threshold of ‘acceptable’ risk gets incrementally relaxed. Risk becomes ‘normalized’ as Diane Vaughan put it. For organizations with fiduciary or public safety responsibilities, this is playing with dynamite. Ask Ford. Ask Firestone.
If it is, your risk management program needs a good overhaul. Your system should give lots of warning before you get near the edge. Monitoring risks in other industries can also help minimize your own.
Fundamentals of Risk Analysis & Risk Management edited by Vlasta Molak. This 472 page collection of learned papers, on the theory and application of risk analysis, a section of perception, law, politics and risk communication and a section on risk management is one of the best in the field. The paper on the Basic Economics of Risk Analysis by James A. Swaney is excellent.
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Risk Solutions offered by CADMUS:
Mike Murphy has been a risk management consultant for the last four years. Prior to that, he spent 17 years (78-96) with Transport Canada, his last five as Regional Director General, Aviation in Winnipeg. Originally trained as a professional pilot, he is the author of an internationally acclaimed 500-page report entitled "An Evaluation of Emergency Response Services at Airports in Canada." He is also the Chairman of the Air Passenger Safety Group (APSG) www.transport2000.ca/APSG , a Director of Transport 2000 Canada www.transport2000.ca, a Director of the Ottawa Chapter of Christian Businessmen's Committee (CBMC) www.cbmc.net and the Secretary General of the Peugeot Club of North America (PCNA). www.peugeotclub.org
Managing Your Public Risk, now in its second year, enjoys a 99.7% acceptance rate. If you have any comments, suggestions or criticisms, please let us know.
Murphy thanks esteemed colleague Brian Lesiuk for his peer review and suggestions on this edition.
(Available in Word 97 by email or by fax from):
e-mail: Michael Murphy
CADMUS Corporate Solutions Limited,
59 Queensline Drive,
Nepean, Ontario K2H 7J4
Tel. (613) 829-0602 Fax (613) 829-6720
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