The most overlooked risks in risk management
This article first appeared in UpJourney. You can read the full piece here.
Hope is not a strategy. Risk Management is.
Risk management is a framework that allows you to identify risks, evaluate which ones are a priority, and plan a way to mitigate those them.
Trying to sell executives on risk management is like taking the role of an insurance salesperson, dwelling on the negative potentialities that might not even happen. There are enough “real” uncertainties and issues that exist right now in any project; how are you going to convince executives to spend their money on risks that have a limited chance of happening?
But even organizations that have a process for managing risk unnecessarily expose themselves to certain kinds of risks. The main way to evaluate risks is to compare their impact and probability. Organizations with a risk management process generally know to focus on high-impact, high-probability risks. The most overlooked risks, then, are ones with disastrous impact but low probability, particularly when the cost to mitigate this risk would be very low.
People who offer simple measures to patch up high-impact, low-probability risks generally get looked down on as fear-mongerers. Just like a healthy parent with young kids can insure their family’s future with an inexpensive life insurance premium, there’s a lot of low-hanging measures businesses could take to prevent disaster-level improbabilities.