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Risk and Hope

December 1, 2015 Leave a comment Go to comments

There is a story about twin brothers who may have looked alike but were in every other way totally different. It’s a story that Ronald Reagan is said to have liked and told many times. This is how it goes, according to the web site, Herding Cats.Twins

There are twin boys of five or six. Mom was worried that the boys had developed extreme personalities — one was a total pessimist, the other a total optimist — their parents took them to a psychiatrist.

First the psychiatrist treated the pessimist. Trying to brighten his outlook, the psychiatrist took him to a room piled to the ceiling with brand-new toys. But instead of yelping with delight, the little boy burst into tears. “What’s the matter?” the psychiatrist asked, baffled. “Don’t you want to play with any of the toys?” “Yes,” the little boy bawled, “but if I did I’d only break them.”

Next the psychiatrist treated the optimist. Trying to dampen his outlook, the psychiatrist took him to a room piled to the ceiling with horse manure. But instead of wrinkling his nose in disgust, the optimist emitted just the yelp of delight the psychiatrist had been hoping to hear from his brother, the pessimist. Then he clambered to the top of the pile, dropped to his knees, and began gleefully digging out scoop after scoop with his bare hands. “What do you think you’re doing?” the psychiatrist asked, just as baffled by the optimist as he had been by the pessimist. “With all this manure,” the little boy replied, beaming, “there must be a pony in here somewhere!”

What has this got to do with risk and its management?

Some people will overlook or downplay the possibility that things will not turn out the way they want or need. They will assume that their assumptions will hold true, that their projected revenues will magically appear, and that customers and others will behave the way they need if they are to achieve their objectives.

It is better to understand that many things can happen between where you are and where you need to be – and that assumptions and forecasts are just that – assumptions and forecasts and not 100% reliable predictions of the future.

Actions are needed to improve the likelihood that things will work out as desired.

Other people are obsessed by and consumed by fear – fear of (the negative form of) risk. It’s not that they will see the glass as half empty, but they will worry about where the rest of the liquid went and what they will do when, inevitably, they run out of water.

It is better to be focused on achieving objectives, to be future-focused instead of dwelling in the land of fear.

Managers and executives, with the help of the risk and assurance practitioner, should neither be oblivious to adverse situations, nor consumed by them.

They need to know, for example, when it is right to go ahead with an major IT initiative, even when they know that security is not 100%.

They need to be able to take the right amount of the right risks, making intelligent and informed decisions.

Effective/mature risk management helps them do that. It can help them see whether there really is a pony and what they need to do to bring it to life.

Mature risk management enables mature management.

I welcome your thoughts.

 

For more of my thinking, please consider joining us for webinars and workshops, conversations about the effective management of risk. I also have a book, World-Class Risk Management.

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