Manage Risks, to your Advantage

It is a classic, if often tragic, self-fulfilling prophecy. One of the key worries consistently cited by seniors is a fear of falling and hurting themselves. This is not an irrational fear. According to the CDC, each year, 3 million older people are treated in emergency departments for fall injuries — and one in five causes a serious injury, like a broken bone. Yet, serious though falls can be, the Fear of Falling, itself, is known to increase the likelihood of falling. This fear can lead people into a more sedentary lifestyle, avoiding risks, which leads to lack of balance and frailty, spiraling down to a situation where falls become almost unavoidable. The avoidance of the risk directly leads to the actualization of the risk.

Of course, not all risks have this characteristic, that avoidance leads to realization. More commonly, the psychological trap around risks is that we are too focused on avoiding the negative outcome — so much so, that we limit our potential or the potential of the companies we lead. If there is an outsized (and inflated) fear of a particular negative outcome, we may choose to avoid striving for goals that inherently bring this risk, even if the upside potential far outweighs the likelihood of the risk actualizing. We may choose to not pursue a new, potentially lucrative product offering, due to the perceived risks of something going wrong along the way. Worse yet, we could avoid changes due to our emotional fear of change, even though without changing, we will steadily lose ground to our more innovative competitors. Our excessive fear of the risk of failure could directly lead to our failure!

In this extreme case, avoidance of the risk (fear of falling) directly leads to the actualization of the risk (falling.)

All change involves risk, this is clear. But, equally true is that risks are inherent in the steady state — avoiding change. Risks in this latter case are just easier to ignore. Risks are unavoidable! Emotional reactions to risks (i.e., fear) do not make the risk less likely. This fear actually increases our risk profile — directly.

Rather than fear risks (or change), we need to Manage the Risks. Risk Management is a dispassionate (that is, non-emotionally-charged) assessment of risks facing a project, product introduction, organizational change, etc. The critical starting point of Risk Management is to evaluate both the Likelihood and the Consequence of each identified risk. And here’s the critical piece — if the Likelihood times Consequence (known as Risk Factor) does not rise above a defined threshold, the risk is ignored. That’s right, if the Risk Factor is low, then we just don’t stress about it.

Now, Avoidance is a valid and oft used strategy for risks that do rise above the Risk Factor threshold. But this is not fearful — it is a considered and measured plan to reduce the likelihood of occurrence. Also, Avoidance is just one risk management strategy. Another common Risk Management strategy is to have a plan ready in case the risk does, in fact, actualize — known as Contingency planning. I’m not going to go into details on Risk Management here. But the key is to meet the inherent risks of your business (and/or life) head-on, through thoughtful and methodical risk management. Don’t fear change — manage it!

Obviously, I think a lot about Risks and Risk Management, judging by the prevalence of this topic in my blog stream. It is key to managing a project or a business. Please reach out here if you’d like to chat about how to apply risk management to the enablement of your vision.