Many risk managers struggle to get their message through to retail consumers. The use of flowery language and jargon is one barrier; but a reliance on abstract imagery is another obstacle. Risk is hard to define; and it can impact on individuals in different ways. Some see risk as an outright threat, while others view it as a stimulating challenge. As a result of these varying perspectives, some react out of fear – while others relish the confrontation.
If we had been given forewarning of a major disruption to our lives that would threaten the health of many, the responses of ordinary citizens would typically fall into 3 distinct camps – the fearful, the responders and the deniers. The fearful become defensive and offer no solutions. The responders take action to mitigate the challenge. The deniers steadfastly proclaim, “That will never happen!”
It is fascinating to see this theory play out in practice over the past few months. Generally speaking, humans are not great at assessing risks unless they are staring us in the face. Surrounded by wild animals we lash out – but a bit of forethought might have prompted us to carry a club. Trying to tackle abstract risks is difficult for most human minds. Bothering to concern ourselves with risks that we don’t expect leads us to doubt the value of risk concerns. If time after time we walk across the savannah and we don’t get attacked why worry about wild animals? But it is this very complacency that lies at the heart of managing risk.
In another area of behavioural science, we espouse the notion of managing expectations. Parents regularly coax young children into believing they are not getting a bike for Christmas. This helps the parent deal with the fallout. Business managers, perhaps unconsciously, do the same with employees around salary increases!
Recognising risks as unexpected events might help risk managers develop a thought process for consumers that makes sense. Examining risks then becomes not far-fetched and abstract but simply a series of alterations to our general expectations. We expect to rise in the morning – we expect to travel to work by train – we expect the office to be open and we expect our computer to work. What if one or more of those expectations were not met? That, in a nutshell, is what risk management is about. It doesn’t have to be clouded in terminology and probability theory. It can be phrased simply as, “What could upset our expectations?”
In the world of business, risk is defined as, “The effect of uncertainty on company objectives.” What could go wrong? What could derail our plans? What could get in the way? Most companies did not envisage a global pandemic; but they did see the usefulness of remote computer connections.
The challenge now is to see what unexpected events might happen in the future. For example, another global shutdown? But the next time with no internet; no telephones, no travel and no alcohol. Simply managing expectations!!