Managers at Work: Confronting the Risks to Your Business

Abstract

Whether the world is becoming more risky is open to disagreement. But the growing public concern about risks is beyond question. Surveys have repeatedly revealed increasing concern over natural and man-made risks to personal health and safety and to our collective well-being. As society becomes more complex and more networked in its relationships, it is likely that the number and kinds of risk will increase. More significantly, the likelihood of the manifestation of risks on a large scale will grow as systems expand and become more complex. This is already the case with brownouts as we inevitably experience imperfectly integrated grids. As we introduce new pharmaceuticals, and are increasingly able to detect side effects among users, risk factors grow in importance, as does the awareness of them. Indeed, at every scale of the human enterprise, risks are intrinsic, not accidental, to the systems involved. Even natural hazards present greater risks as we choose to live on the attractive terrain associated with floods, earthquakes, landslides, and storms. There are significant opportunities to reduce risks. But a too-limited perspective, in both time and space, in any future risk situation thwarts intelligent management and effective action. With the exception of regulatory requirements, which have grown steadily over the last several decades, there is little incentive in the market system to look ahead and anticipate risks; although liability is drawing businesses' attention ever more sharply to the implication of risk. Similarly, in terms of government action, whether legislative or executive, there is no incentive to look ahead at side effects that may incur risks, except in those areas where there is, by statute, a requirement such as the Environmental Impact Statements' requirement to show foresight. Even here, the issues are confounded by the overwhelming passion for detail and an often astigmatic focus on the limited questions. The statutory requirements for foresight lead to concentration on the tree while missing the forest. I propose a general risk analysis question that can become the starting framework for anyone--public or private, individual or group, corporate or public interest group, government agency or citizen-at-large--to quickly develop a comprehensive overview of any situation with regard to any risk they are concerned with. The generalized risk question, as I see it, is Who is at what kind of risk, when, where, with what effects, from what causes, with whom, responsible (for), by what instruments, in what value context, at what costs and benefits for its management? Being able to answer this complex question puts one in a great starting position to think ahead intelligently. Let me suggest that breaking the complex question into individual clauses offers further insight into the risks. …