Risks: How Far Should You Go?

Risks: How Far Should You Go? - 1

Making decisions is the easiest thing. Making the right decision however less so!

Decisions need to evaluate the risk they entail. Risk is an unpredictable that has a tendency to occur at the worst moment. Why is that ? How far shall one push it before the risk inevitably turns into a reality? 

When something happened that was not foreseen, things can go into disarray. A market crash, a regulation changing or a competitor with the new disruptive product, all can happen in a heartbeat. 

The truth though is that the post-mortem of a situation often illustrates that all the signs of a risk happening had been displayed in advance of the matter occurring. However, these signs have been dismissed often instinctively. 

Risk assessment is an integral part of any reasoning of strategy definition. It always vary according to circumstances. In our experience, if you ask yourself some basic questions, you should walk into decisions and risk with the eyes open. If you are lucky, it may prevent the risk from occurring altogether, and have you ready if it does. 

These simple questions below dictate often complex analysis and answers and one rarely finds exhaustive responses. These questions should be assessed nevertheless.

In essence what it boils down to is to check:  

  • What is the probability of a risk occurring;
  • What the consequences if the risk does occur;
  • What the severity of the consequences of that risk and immediate foreseeable impact (dependency analysis); 
  • What are the preventive actions that could be identified and possibly taken;
  • What impact these preventive actions may have if the risk does not occur;

Asking only one of these questions will not be enough. Even if the answer to the first question is “not likely at all”, the cycle must be followed as it can flush out some unexpected points that may require reassessment. 

After the event, finger pointing is, in my opinion, far less important than learning why it really happened, why it was not detected in advance, and why it was dismissed as non possible, that is, unless it was part of the actions identified with the strategy chosen and part of the decision made. 

As the old sea dog says: Prepare for the worst and hope for the best, as if it is possible it may happen. The sea is kind to the prepared mariner!


SImon Vumbaca

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