From A Different Angle: Why Risk Management

The journey to risk management maturity starts in the mind. It is not just a work that we do, but it is a way of how we do our work.

Risk management is foremost a thought process that looks at aspirations or goals in the context of uncertainty. Everything in the world is uncertain. As David Hume asserted, “All knowledge degenerates into probability.”

When we try to achieve a goal, we think of the strategies and actions that we should do that produce outputs and outcomes to get us to our goal. It seems straightforward. We often think so every time we are planning to achieve a goal, whether it is personal goal like having a picnic with our families or organizational goal like reducing poverty or helping people in need.

But it is not! There are uncertainties that affect inputs, strategies, actions, outputs, outcomes, and ultimately the achievement of the goal we set out to do. For example, we may not be able to buy food for our planned family picnic because we became sick, or we met an accident or because of surge in clients we are not able to process assistance applications on time. As Robert Burn’s wrote in his poem, “The best laid plans of mice and men often go awry.” Why? It is because of uncertainty. Our best knowledge is still probability, no matter how high the probability is.

Research shows that only eight percent of people achieve their goals. Only 20 percent of companies achieve their strategic goals and only 10 percent achieved their business objectives. Failure to achieve goals and objectives can be due to many factors but, in the end, it is due to failure to consider the uncertainties these factors pose to goal achievement.

Managing uncertainties and their impact on goals, or, in short, risk management, is thus, often the missing key to success. A study shows that risk management adds at least 40 percent more chance of achieving goals and that 83 percent of high-performing organizations do risk management.