Conquering the Fear of the Unknown

Things can go wrong. Success is not fully in our hands, regardless of what we think. Part of it is in the hands of the unknown. Thankfully, it is not the result of flipping coins. Nor is it just looking at a glass either half full or half empty. We can reduce the role of the unknown till it is fearsome no more.

As Robert Burns famously wrote in his poem To a Mouse, “The best-laid plans of mice and men often go awry.” That is bleak, if not scary, especially to a diehard planner!

One cannot afford plans going awry if the stakes are high. Even when the likelihood of a plan going awry is  negligible, the consequence can be catastrophic. Overlooking it can mean the end of an organization  or its reputation or even the world, e.g., nuclear holocaust.

Plans are Risk Management Tools

Planning, at its core, is a form of risk management. Done properly, it reduces the chance and consequence of things going awry.

By analyzing situations and using the results, goals, strategies, and resource allocations are grounded in reality, allowing the transformation of  wish lists in colorful sticky notes into actionable road map. By identifying goals, plans ensure that actions and resources lead to somewhere rather than nowhere. By strengthening the linkage and alignment of goals, strategies, and resources, teams and organizations get to where they want to go more effectively and efficiently. Effectively, because they do the right things and efficiently, because they do the right things right.

Plans are, by purpose, prepared to take us from Point A to Point B. Yet, Point A may not be as simple as it looks. It is rarely fixed. Instead, it is often shifting. Market shifts, prices fluctuate, people come and go, priorities change, and uncertainties (a.k.a. risk events) may emerge to stamp their unwelcome presence. As a result, getting from Point A to Point B may not be as simple as finding a straight line from A to B, executing on it, watching, and making correction and corrective actions.

Falling into the oversimplification trap is tempting and easy, especially with the principle of least effort at work. As Einstein famously said, “Everything should be made as simple as possible, but not simpler.”

Oversimplification occurs when complex issues, systems, and problems  are so radically simplified that crucial details and nuances are lost. Combined with the principle of least effort- the tendency of people, animals, and machines to choose the path requiring the least amount of physical or mental energy -it can lead us to overlook critical risks and realities.

Uncertainties: Ubiquities that We Do Not See- or Choose Not to See

Everything, not only plans, is affected by uncertainty. There is uncertainty where and when there is something we hope to achieve, whether with or in organizations, projects, processes, resources, or assets. The effect of uncertainty on our goal or objective is called “risk.”  Risks can be invisible foes or allies to everything we want to achieve.

Thus, everyone, wherever they are in the organization, must lead with risk management. That includes everybody, not just leaders. As is often said, everyone is a risk manager.

Where everything is interconnected, failure to manage a risk in one area of work or responsibility can trigger the likelihood of more consequential risks that could escalate into emergencies. Someone failing to repair a hole in their area of a boat, for example, can sink the entire boat. A person failing to address a small lump in their body can lead to the lump growing into runaway cancer. If an ounce of prevention is worth a pound of cure, risk management is prevention, or more accurately, mitigation.

The Importance of Leading with Risk Management

Risk management considers not only  what we want to happen but also what could happen. It helps us identify and address the effects of uncertainty before they become obstacles-or seize them when they present opportunities. By anticipating both risks and opportunities, organizations make better-informed decisions, achieve stronger results, and build greater trust and confidence among stakeholders and the public.

When embraced by a critical mass of people- especially by organizational leaders- risk management sets behavioral cues and helps shape a risk-conscious organizational culture. Consider the example of a boat with a small leak. If those responsible for maintaining their section of the boat ignore the problem and no one intervenes, others begin to accept neglect as normal. It is the broken window theory at work where visible signs of neglect and disorder encourage further neglect and increasingly risky behaviors.

Contrary to what many believe, risk management is not necessarily an additional burden or separate activity. It is a way of thinking about and doing work to ensure and optimize success. By identifying potential problems,  it reduces costly rework, prevents problems escalating into crises, and improves the likelihood of reaching desired outcomes.

Risk Management is Just a Scarecrow, not Scary

Scarecrows are effective at scaring people, but not really in scaring crows, including people if they know. The same is true with risk management. Because economists, mathematicians, statisticians, actuaries, and financial theorists developed its core principles, it developed a dry and scary reputation.

Yet, it is not really so. Even a janitor can practice it and thus perform the role of a risk manager contributing to organizational success. When John F. Kennedy asked a NASA janitor what he does, the janitor replied, “I am not mopping the floors, I am putting a man on the moon.” Anyone can practice risk management by answering six simple questions:

1.      What is our team’s goal?

2.      What chance events could happen that will derail the achievement of our goal?

3.      Which of these chance events are most important or critical?

4.      If the chance events happen, do we accept the consequence and if not, what are we going to do about it?

5.      Did the action we took worked?

6.      What changed and what improved?

Some Tools in the Risk Management Toolbox

There are tools that can be used in identifying and managing risks, including AI risks. Many come with software.

One of these is scenario analysis. Scenario analysis forecast potential future outcomes by asking or positing what-if situations. What if there is a budget cut and what if there is a supply chain problem are examples of what-if questions. If a team is reviewing a plan,  which they are proud and eager to put out, questions such as what if the plan assumptions are wrong and what if there are killer assumptions - assumptions that if proven false will lead to the failure of the entire plan. Usually, there are three scenarios considered: 1) base case, which is the most likely or average scenario, 2) worst case, and 3) the best case where everything goes well.

Another tool, which is widely popular especially in risk registers, is the Probability and Impact Matrix. Events that may or may not happen that can derail goal achievement are examined as to their probability of occurring and their consequence. Events that have high probability and consequence are given priority attention. The tool can be used to prioritize and classify risks, from the least to the most critical.

A risk register is a risk management tool in itself. A risk register is a document or database used to identify, assess, address, and track potential threats and opportunities that could impact an organization, project, process, or resource. It can be used when there are delays or shortfalls in a delivery process.

Failure Mode and Effect Analysis, or FMEA, is another tool. It asks questions about what can go wrong in each step in a process and what happens if failure occurs. It then determines the causes of the failure. The Five Whys, which is another tool, can be used to determine the root causes by repeatedly asking “Why?” Finally, a Risk Priority Number (RPN) is assigned to each potential failure. An RPN is the product of severity times occurrence, times detection. Mitigating actions are focused on potential risks with high RPNs.

Another tool is the development of Key Risk Indicators or KRIs. By tracking indicators like population, economic growth, and staff turnover, for example, one can track the trajectory of risks and anticipate when the risk levels are higher or reach a tipping point to crisis level. Often, the challenge is when related key indicators are with different departments. The worse the lack of communication and collaboration between departments or teams (i.e., the silo effect), the harder the challenge.

There are other tools that can be used. These tools can be used at varying levels of rigor and sophistication depending on situational requirements and available competencies and expertise.

In summary, we can run and hide from uncertainties, but we cannot escape them. However, we can “defang” them to reduce their effects on our goals. As Gary Cohn said, “If you do not invest in risk management, it does not matter what business you are in. It is a risky business.” We must face and manage them before they become unmanageable. A project management proverb says, “ If you don’t attack the risks, the risks will attack you.” And yes, risk management is different from worrying about our projects. Risk management not only helps conquer the fear of but tames the unknown. Be not afraid or lazy!