Our Natural
Inclinations
Every day of our lives we sum up situations and make
decisions. Sometimes we make the right decisions and other times our decisions
are less than optimal. Our decision making can be active and passive. Sometimes
we decide to do something and other times we choose not to do something.
Sometimes the passive choice is not a conscious choice but merely an omission.
Influencing the
Outcomes of Our Daily Lives
There is so much more happening in our daily lives. We take
more chances than our ancestors ever did. Just think of driving in a car or of
children and electricity. We live in an information age - in a world that has
many more people than yester-year. How often do we stop to consider whether our
children know how to get out of the home if there is a fire.
Opportunities and
Winners
In the early days of merchants and trading, people very
quickly analysed the upside and down-side of business opportunities. Risk was
recognised as an opportunity. There would be some people that would gravitate
away from risky ventures and others who would discover ways to influence
outcomes and seize the opportunity. Those who were able to identify the
opportunities to influence outcomes usually tended to be more successful.
Influencing Outcomes
There are many situations that we cannot prevent. In some
cases such as storms at sea we may not even be able to have any influence over
the outcome. So insurance derived its origins from the concept of the many
paying for the few. Given the comfort that this provided, merchants were able
to take greater chances resulting in greater benefits.
Evolution of Risk
Management
None knew better than insurers of what could happen and what
could go wrong. This was because the business of insurance lay in paying for
losses incurred by customers. In order for insurers to be viable there needed
to be a way of encouraging customers to exercise reasonable care and by
rewarding good performance. And so risk management evolved from natural
intuition and analytical thinking into a more formal process of communication
of the actions to influence outcomes. In other words how carefully
opportunities were being managed.
Managing Performance
Today businesses are larger and more competitive than ever
before. Society is far less tolerant of poor performance. Government services
are subject to increased publicity and public scrutiny - voters punish poor
performance. Globalisation of communication and trading has lead to the endless
pursuit of competitive edge. The demand for quality service and value has led
to diminishing margins for error. Investors are demanding more and more
information on how companies are managed. Borrowing money has become ever more
competitive and linked to sound management of opportunities. Share prices
reward organisations that not only deliver results but install confidence in
the future by demonstrating care and diligence.
Managing Confidence
Managing confidence is the challenge of business and
governments beyond 2000. The very notion of confidence relates to trust and
predictability. It also focuses on stakeholders who by their very perceptions
of predictability/confidence/risk will exert ever-increasing influence by
punishing unpredictability and increasingly rewarding the generation of
confidence. It goes without saying that the best cure is prevention and in
cases where outcomes are subject to pure uncontrollable chance such as
earthquakes, the generation of confidence through demonstrating preparedness
for the unexpected.
Managing Success
If we can understand the pulse of risk and understand its
delicate balance with opportunity we can influence outcomes and increase the
chance of achieving our objectives whether they be individual, corporate or
community. So we need to make the right choices and do the right things free of
omissions by taking care. This is all about strategic thinking, analysing and
attention to detail. Strategic thinking is one thing but converting it into the
right action is what separates winners from losers. After all, who would you
leave your children or your money with - someone who takes care or someone who
cuts corners? The common sense laws of everyday life are the keys to the logic
of business. Risk management is so simple that it is almost impossible to
describe.
This is the story of managing outcomes through doing the
right things and building confidence. You could even shift the paradigm and
call it managing success.
So what we really are talking about is the phenomenon of
risk.
By Jonathan Sesel
CURTESY ROTIMI OLUKOREDE
