About Risk Management
I’ve been thinking about what risk management is and its purpose. Is it a technical, a managerial or a business skill? No, in fact, it is a life skill! It is something we do for living!
The most fascinating and magical thing about risk management is the intuitiveness of the process. Risk management is the most primitive ability of a human being. We are natural born risk managers. The nerve system, the endocrine system, our senses, organs. Everything was created to perceive and respond to risks. It is a question of survival. Everybody does it. All the time!
We all know how to identify, measure, prioritize, respond and monitor what is going on around us. But we can increase our expertise studying some processes, a few techniques and understand a couple of concepts that make the whole difference. But most of all, we have to change our mindset, reconstruct some believes and face risks with a positive attitude.
A risk is something uncertain that affects what you are trying to do. If something bad is expected to happen this risk is a threat. In case of a positive impact, we name it an opportunity. They are both risks.
Risk management is about making better decisions in an uncertain environment so that we can place the risk level at an acceptable degree according to our resources, constraints and capabilities.
Risk Management should be tailored to a specific context and must aim at minimizing threats while maximizing the opportunities. Risk Management is about helping you reaching your goals, and to do this you must follow three basic steps.
The first one is to define the goal properly. Some people or organizations really don’t know where they want to be in the future. A reachable, realistic and measurable goal must be established.
The second step is to create a plan to guide you to your goal, because without a plan, with defined steps you will move randomly, and with no means to find out if you are going to the right direction.
Finally, you must manage your risks, for one simple and fundamental fact. Your plan is often full of uncertainties, assumptions and constraints. You have internal and external factors that may influence your plan. They are all sources of risks and if you don’t treat them properly, and turn your plan into something reliable, the chance to reach your goal is minimal, because your plan is a fallacy, and you can’t let it happen. This is why risk management exists. Think about it.