|The reality is that nobody is enthralled by any of the four potential outcomes of “insuring” themselves against risk, which are:
- No insurance; hope nothing happens
- No insurance; something goes wrong
- Insurance; nothing goes wrong (cost is sunk)
- Insurance; something goes wrong (no one is excited over filing a claim)
Outcome #1 is the most tempting because, when you are lucky enough to “achieve” it, it is the least costly. However, this option leaves you personally and professionally exposed to disaster.
But proper risk management also doesn’t involve you do not have to spend premiums to chase away gremlins under the bed. The investment involved to preempt every risk in every project in the portfolio is impractical. You must determine your tolerance for risk, then prioritize the risks with a mitigation plan based on impact and probability.