Opinion
Issue No. 19 - October/November 2004
Looking forward to risk
by Robert Heath
Risk management as a practical activity has been with the human species since the inception of life. The basic drives to find shelter, procreate, and avoid extermination are, in fact, principles of managing to avoid dying (or managing to ensure survival). Any statement that contains "ensure" or "avoid" is a statement about risk management.
We can move further. Any action – historic or contemporary – that involves managing inherently is one of managing risk.
Historically, we can trace interest in risk in terms of gambling and cargo insurance through Ancient Greek and Roman eras in Western history. Asian and Middle Eastern cultures have similar histories. The word hazard, for example, came from al zahr, an Arabic word for dice.
Risk - Some quick Fundamentals
Before we move on to the real focus of this presentation we need to realize four fundamental concepts of risk.
First, risk cannot be created nor destroyed. For many this is a little difficult to grasp. In quick and simple explanation, the probability of loss ultimately is total (mathematically = 1). Consequently any means by which loss can occur is less than total and simply fits within the package of total loss.
But, secondly, risk can be changed from one form to another. Risk management is about choosing which sources of risk we need to manage more effectively to reduce the threat of event incidence and/or the value of loss. We do so at the risk of transforming the incidence threat and impact damage of those sources of risk we do not manage.
Third, risk management changes the perception, profile, and riskiness of risk. In short, when people believe risk management exists and is in place they actually perform riskier behaviours.
Fourth, any risk indicates an opportunity and any opportunity indicates a risk. This is an important aspect of risk and risk management. We can use risk methodologies to convert weaknesses and threats into actual strengths...
