Earl Mardle has a great post about risk management. He reflects on a Discovery channel show which suggested that as cars became safer the amount of risky driving increased. Suggesting there is a pyschological comfort level to which we like to push ourselves.

He then joins this thought to the idea of risk management in business:

Within business there is the whole Risk management process which, at first glance, looks and sounds, like a process for minimizing the risk to which a business is exposed; preferably by getting someone else to carry that risk at no, or low, cost to the company.

Paradoxically, I suspect, that this simply enables the company to assume more and more risk in other areas until it reaches again its limits on comfort with the risk.

But the fact is that the actual risks are not extinguished or countered or canceled out by risk management, they are simply externalized to the business and bedded into the surrounding community. Where they accumulate.

He then goes on to suggest this process fuels a forthcoming financial crisis when rising levels of debt pass crisis point:

Bizarrely, we will accept that our lives should be turned to custard, not because the oil is running out or the food wont grow any more or we fall sick to some appalling new disease, but because two rows of numbers no longer add up.

Our entire social and political and economic lives will be held hostage to those rows of numbers, and rather than just dump all the trouble of the people who caused it, we will be forced to protect those people who have apparently earned the right to have their numbers add up, even if getting them to do so costs us our livelihoods, our futures and our lives.

This sparks a series of loose assocations for me:

I certainly think that people like to get somewhere near the edge of their comfort zone, to get a balance between stability/boredom and excitement/anxiety. On a more mundane level than Earl references, I think excessive efforts to eliminate risk or exercise control will often be quite counterproductive.

I also believe it’s fairly common to want to find someone else to take responsibility for some of the stuff we create for ourselves. I don’t need to give examples for that, do I?

I hated economics at Uni, especially macroeconomics. Sometimes I thought it was because I was thick but I also felt is was just terribly ungrounded and surreal. Earl’s post reminds me of that feeling.

My last post about the tyranny of the explicit in branding is linked to this too in some way. Something about the dangers of turning our felt experience into an abstraction and assuming we’ve understood what’s going on. I should try to find a more down-to-earth way of expressing that but I’ve got a train to catch… sorry.

3 thoughts on “Risk

  1. Johnnie Moore

    Hi Charles, yes it is a bit disturbing and we should be careful in how we try to apply the idea. We shouldn’t take it so far as to mandate recklessness.

    On the other hand, there’s some interesting evidence about the paradoxical impact of getting rid of traffic calming measures which I blogged here.

  2. Earl Mardle

    I remember some of this from about 30 years ago when some research showed that making roads FEEL less safe produced better behaviour.

    They experimented with off camber corners that slowed people down a whole lot more than was justified by the changed camber.

    They also worked with visual cues such as stripes across the road that were closer together nearer the intersection.

    The impression was that the car was slowing less than you assumed and people braked a bit harder than normal.

    The fact is that most of us are crap are assessing risk. We are terrified of terrorists on planes and alar on apples, but have no problems with air pollution you can cut with a knife, massive debt or unhealthy food being pumped into our kids.

    And as for driving, most of us haven’t a clue about the state of the road, the state of our tyres, brakes and steering and zero information on the state and skills of the other drivers on the road, yet we don’t give it another thought when we hop in the car.

    Similarly, we assume that because someone is a CEO, or CFO, that they are qualified, intelligent, stable, ethical and have OUR best interests at heart when we buy their shares, work for them or put our money into their institutions.

    Despite the parade of such people through the courts.

    Then there is Greenspan.


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