As Risk Managers, we work in a world of terms such as ‘probability’ and ‘possibility’ and ‘threat’. The challenge is to interpret these terms in a way which will guide decisions as to how to respond.
Risk analysis centres on two key factors – impact and likelihood.
- Impact is an assessment of how much harm the hazard is likely to cause, whether that is to an individual or an organization.
- Likelihood is the potential for that hazard to cause harm.
In simple terms:
- What is the hazard?
- How likely is it to cause harm?
- How damaging could it be?
Personal Risk Perception
As a risk management professional, it is necessary to always question our perception of risk. Humans, with instincts and emotions, are constantly challenged to rationalise how we see the world, before attempting to process information into a cognisant, almost factual analysis.
Personal risk perception is influenced by many factors. We each tread a different path through life, but it is not always the things that have harmed us that impact our bias. Indeed, where previously harmed by something we may find that we are less fearful in future, as the impact was not as bad as originally feared.
We also fear on the behalf of others, particularly those we feel responsible for or may be vulnerable. This perception of risk may be amplified, due to our empathetic or protective nature, for example, crossing the street is a risk, a child crossing the street becomes an emotive issue.
The potential impact of human factors influencing our risk analysis can be disproportionate. The fact that something could cause harm does not mean that it will, but the perception of something that could harm us significantly may start to grow, like the scary monster of a childhood dream.
For example, travel presents hazards. Whether we fly, drive, cycle or walk, there are risks. Statistical evidence shows the risk of dying whilst flying is significantly less than taking a trip in a car, yet which scares humans the most? Some people are afraid of travelling in a car, they are rare but we all know someone with a fear of flying or may carry this fear ourselves.
There is nothing wrong with being fearful, this instinct is what has kept us alive on this planet for so long, the challenge is understanding the true risk (rational) as opposed to the fear-driven risk (emotional).
As risk management professionals we are always vigilant to ensure we do not exploit the opportunity for fear-driven risk as a marketing opportunity. In addition to the ethical principle, it is also likely to disfigure the risk picture and resulting risk management plan.
So how do we rank one risk against another?
Firstly, we need to ensure the process we adopt is risk analysis as opposed to simply risk perception.
We then need to ensure we are proportionate in how we rank the risk. There is the potential to allow the ranking of a risk to rise disproportionately due to its currency and our feeling of vulnerability.
We also need to calibrate and cross-check our risk perception. It is highly recommended to build peer review into the risk analysis process. Try to ensure this calibration and cross-checking is robust and critical to ensure it is beneficial.
Stop and think for a moment? In the event industry context, which risk is greatest:
- Terrorism or Covid-19?
- An electrician falling from a ladder or a singer falling from a stage?
There is no right answer.
Is terrorism as much of a threat as it was before Covid-19 started to harm people? The answer is probably yes, but a new risk has come along, which we are struggling to calibrate and rank against others.
So how about this. Which risk is greatest:
- Terrorism or an electrician falling from a ladder?
Again, no right answer. The challenge is comparing one risk to another and trying to rank very different hazards, likelihoods and impacts.
It can become confusing.
How to bring clarity
- Understand that risk analysis is a skill. Most managers will hold a degree of responsibility but who are your specialists in administering the process.
- Separate risks into groups, strategic, tactical and operational. This will allow ‘similar’ risks to the event to be compared.
- Be aware of relying too heavily on risk ‘scores’ and be prepared to challenge perceptions.
- Build mitigation which is agile and allows adaptation in response to an evolving risk picture.
- Be prepared to admit your mitigation may not be right the first time.
- Try to avoid fear-driven risk analysis. Fear is understandable but will tend to cloud risk analysis.
And finally… the golden rule
Never, never rush risk analysis.
At times it may feel bureaucratic and burdensome, it is not everyone’s idea of a rewarding way to spend their workday. Professional risk analysis is rarely wasted and will increase both the efficiency and effectiveness of mitigation.
Powermill is a consultancy that provides corporate event solutions globally to a select group of clients. Our mission is to be the risk management and knowledge partner of choice for the corporate events sector.