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The Risk Doctor's Cures for Common Risk Ailments

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The Risk Doctor's Cures for Common Risk Ailments offers tried-and-true cures for risk management problems at both the organizational and project levels. Written by noted risk management consultant David Hillson, aka The Risk Doctor, this book gives practical advice based on sound risk management principles and real-life cases.
Using the medical metaphor, Dr. Hillson prescribes treatment for serious issues that can lead to project or business failure. These common risk management ailments include risk blindness, risk amnesia, risk muteness, risk obesity, risk anorexia, risk depression, and risk myopia.
Proper risk management is essential to project and business success but is often misunderstood and inappropriately applied at all levels of the organization. This book makes the basics comprehensible and the application of sound risk management workable.
Follow The Risk Doctor's recommended treatment plan and begin a fast recovery from risk ailments that have troubled your projects and your business—and look forward to a future filled with the rewards of a healthy approach to risk management!

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Introducing Common Risk Ailments

ePub

Many people are disappointed when their projects or businesses struggle or fail. But perhaps we shouldn’t be too surprised. After all, projects and businesses are inherently risky undertakings, and taking risk always involves the possibility of failure. But risk-taking also offers the potential for reward—creating value and benefits for stakeholders and customers and developing innovative products and services that change the world for the better.

For many businesses, much of their risk-taking is embodied in the projects they perform. All projects share some key characteristics that inevitably introduce risk, including the following:

  • Uniqueness. Every project involves at least some elements that have not been undertaken before, and risk is naturally associated with these elements.

  • Complexity. Projects are more than a simple list of tasks to be performed. They involve various kinds of complexity, including technical, commercial, and relational, each of which brings risk into the project.

 

Ailment 1: Risk Blindness

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“Risk blindness” is the condition of being unaware of the existence of risk. “Seeing is believing,” so when others mention risk, a risk-blind person or organization doesn’t understand what they are talking about. They believe that people who claim to see risk are delusional, shadow-boxing, and fighting imaginary foes.

A related condition, voluntary risk blindness, is suffered by those who deny the existence of risk even though they are fully aware of it. “There are none so blind as those who will not see”: Organizations or project teams that choose to wear a blindfold or risk blinders are deliberately acting as if they cannot see risk. This ailment has similar symptoms and treatment options to genuine risk blindness.

When asked what they believe to be their biggest current risk, people suffering from risk blindness tend to reply “I don’t know”—which in effect is their biggest current risk! A senior Royal Navy admiral was notorious for asking everyone he met when he visited a ship: “What are your top three risks and what are you doing about them?” Any officer unable to answer was in trouble.

 

Ailment 2: Risk Depression

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“Risk depression” occurs when individuals, groups, teams, or organizations view risk only in negative terms. Most international risk management standards and guidelines contain clear statements that the concept of risk includes both downside and upside. Both threats and opportunities meet the Project Management Institute definition of “risk” because they are “uncertain future events or conditions that, if they occur, have an effect on achievement of one or more objectives” The only difference between a threat and an opportunity is the nature of the effect if the uncertainty becomes a reality. Threats have negative impacts (e.g., delay, additional cost, reduced performance, damaged reputation), while opportunities have positive impacts (e.g., reduced time or cost, enhanced performance or reputation, increased value).

Despite the consensus among standards that risk management should address both good and bad risks, preferably in an integrated process, many organizations ignore upside opportunity risks and focus exclusively on downside threat risks. This negative monomania is the underlying cause of risk depression.

 

Ailment 3: Risk Cognitive Confusion

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“Risk cognitive confusion” is the condition of confusing risks with things that are not risks and then thinking and acting as if they were risks.

It is axiomatic that risk management must manage risks, and an essential prerequisite is that risk identification must identify risks. However, one of the most common failings in the risk management process is for the risk identification step to identify items that are not risks. Clearly, if this early stage of the risk process fails, then subsequent steps will be doomed and risk management will not be effective. It is therefore essential to ensure that risk identification zeroes in on risks only.

The presenting symptoms of risk cognitive confusion are unmistakable. Individuals, teams, or organizations suffering from risk cognitive confusion will include non-risks wherever they discuss, record, or report on risks. This is most evident in risk registers, which are used to hold information on risks in a consistent format. If a risk register includes items that do not conform with the accepted definition of risk, then risk cognitive confusion is occurring.

 

Ailment 4: Risk Bipolar Disorder

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“Risk bipolar disorder” is a condition that affects the way people see the world, with swings from one extreme to the other in their perception of risk. Sufferers tend to be either very risk-averse, avoiding risk at any cost, or extremely risk-seeking, taking on more risk than they can handle. Both extremes lead to inappropriate risk-taking: either taking on too much risk or too little.

The impact on behavior depends on which mood is being experienced at any particular time. In the risk-averse state, the sufferer may feel low, lethargic, and uninterested in taking any action that involves any degree of risk exposure, however small. Alternatively, the risk bipolar can become overly risk-seeking, feeling excitable and tending to be overactive in the amount of risk they take.

Risk bipolar disorder differs from normal “mood swings” in that each extreme episode can last for long periods; in fact, sufferers may not experience a “normal” mood very often.

Risk bipolar disorder cannot be properly understood without understanding the range of possible risk attitudes that might be adopted by an individual or group. Risk attitude can be defined as “the chosen response of an individual or group to a given risky situation, influenced by risk perception.”1

 

Ailment 5: Risk Obesity

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“Risk obesity” occurs when an organization has too much risk in the system, resulting from uncontrolled risk appetite. This can affect the business as a whole if strategic risk-taking decisions by the senior management team lead to risk exposure that is greater than the organization can manage. But risk obesity can also occur at the project level, when a particular project is carrying levels of risk that are too high, posing a significant threat to project success.

Physical obesity is a medical condition in which excess body fat has accumulated to the extent that it may have an adverse effect on health, possibly leading to reduced life expectancy. Obesity increases the likelihood of various diseases, particularly heart disease, Type 2 diabetes, obstructive sleep apnea, certain types of cancer, and osteoarthritis. Obesity is most commonly caused by a combination of excessive food intake, lack of physical activity, and genetic susceptibility.

Each of these characteristics has parallels in risk obesity, where we accumulate excessive risk exposure that threatens the ongoing health of our business or project—and that may ultimately be terminal. Risk obesity also makes other risk ailments more likely, as high levels of risk exposure challenge the ability of our risk management processes to cope.

 

Ailment 6: Risk Anorexia

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“Risk anorexia” is an extreme rejection of all types of risk exposure—a refusal to take risk under any circumstances. Like its medical counterpart, risk anorexia is a combination of damaging behavior and misguided thinking, and it can ultimately be life-threatening for a business or project if it is not treated effectively. Risk anorexia arises from a false perception of both self and situation, driven by a mindset that causes the sufferer to make inappropriate judgments on the right course of action.

Risk anorexia is characterized by unrealistic limitation of the amount of risk taken, irrational fear of the consequences of carrying too much risk, and a distorted self-image that appears to be overladen with risk when the opposite is the reality. The faulty self-image has two aspects:

1. A perception that risk thresholds have been breached and risk exposure is already too high.

2. An underestimate of risk capacity, or how much risk can and should be borne.

Risk anorexia can affect both individuals and organizations. The effect on a business can be particularly severe in situations where organizational culture and norms have institutionalized risk-anorexic behavior, which is reinforced by key leaders who are themselves sufferers. Projects and operations in a risk-anorexic business are also likely to suffer from inadequate risk-taking, limiting the ability to innovate or be creative.

 

Ailment 7: Risk Myopia

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“Risk myopia” occurs when individuals or groups are shortsighted about risk, unable to take in the full risk picture, which leads them to focus exclusively on short-term risks or those within a limited perspective.

There’s a lot of risk out there, and we need to see it if we are to manage it effectively. Although risk myopia is not as serious as risk blindness, it can still have serious effects and lead us into difficult circumstances that could have been avoided if our risk vision had been more inclusive.

The risk landscape is broad, covering a wide range of uncertainties that could affect our ability to achieve our objectives. It stretches into the far distant future, over the horizon and beyond our sight. We need to understand and manage any and every uncertainty that matters, including those that originate far away.

Yet organizations and their project teams tend to focus largely on those risks that are closest to them, as a result of two subconscious influences: proximity (closeness in time or space) and propinquity (closeness to our personal interests). Where this natural close-up focus becomes limiting—excluding visibility of risks that are further off and preventing us from paying proper attention to them—we are likely to be suffering from risk myopia. A number of symptoms indicate shortsightedness in risk vision.

 

Ailment 8: Risk (Analysis) Paralysis

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“Risk paralysis” describes the condition where a business or project team fails to take action on identified risks. The team performs the first stages of the risk process well, exposing and recording genuine threats and opportunities, assessing their characteristics so that the risks can be prioritized, and developing appropriate targeted risk responses. However, in situations of risk paralysis, no further action is taken to implement agreed-upon responses and manage the risks. This is sometimes known as “deer in the headlights” syndrome, where the sight of oncoming risks causes extreme fear or anxiety, leading to an inability to move. More often risk paralysis reflects a lack of commitment or energy to take necessary action.

A particular manifestation of this ailment is “risk analysis paralysis.” In these cases, a lot of time and effort are spent performing quantitative risk analysis (QRA), but again leading to little or no action. Risk models are produced and refined, outputs are examined and analyzed, new and better input data are gathered, and the models are run again (and again). When the organization or project gets stuck in endless QRA cycles, risk analysis paralysis occurs.

 

Ailment 9: Risk Muteness

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“Risk muteness” is an inability to speak about risk despite being aware of its existence and importance. This ailment is apparent most often in a failure to communicate risk information to those who need it. This typically occurs upwards in an organization, when those at the working level know about risk and are trying to deal with it but are unwilling or unable to pass that information along to their superiors, bosses, sponsors, senior managers, clients, or other stakeholders.

Risk muteness can be total, resulting in complete silence regarding risk information. Alternatively, the partial condition of being “risk speech-impaired” might occur, when communication about risk is unclear, inefficient, or poorly expressed. Another related partial disorder is “selective risk mutism,” where a person who is normally capable of speech is unable to speak about risk in given situations or to specific people.

Sometimes people are not comfortable communicating about risk with all of their stakeholders, although they might make some exceptions. Perhaps they are unwilling to expose the full risk picture to their boss or senior management, worried that it might make them appear incompetent. Or they may choose to hide risks from a client or customer for fear of implying poor performance. Sometimes people do not share risks with their peers because they think they might look bad by comparison. In cases of selective risk mutism, anxiety or fear renders the sufferer incapable of communicating about risk to certain people or in specific situations.

 

Ailment 10: Risk Amnesia

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“Risk amnesia” is the condition of forgetting about previous risk experience; sufferers can be individuals, groups, project teams, or entire organizations. Risk amnesia occurs when individuals or groups are unaware of the relevance of risks they have previously encountered, leading them to treat all current risks as novel. This means that they start from square one each time in terms of assessment and management. The condition is sometimes referred to as having risk blind-spots.

In the risk world, there is a lot of talk about the difference between “known-unknowns” and “unknown-unknowns.” The former term relates to risks that can be described and managed, whereas the latter is reserved for uncertainties that are not currently understood. Former U.S. Defense Secretary Donald Rumsfeld famously commented on this at a news briefing about the Iraq war in February 2002, in response to a question about reports indicating lack of evidence that Iraq had attempted to or was willing to supply terrorists with weapons of mass destruction. Rumsfeld stated, “Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known-knowns; there are things we know we know. We also know there are known-unknowns; that is to say we know there are some things we do not know. But there are also unknown-unknowns—the ones we don’t know we don’t know.”

 

Epilogue: Strategies for Ensuring Risk Health

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The standard examination for UK medical students states: “Health is not the absence of disease: Discuss.” In the same way that peace is not the absence of war, or happiness is not the absence of sadness, it is also true that positive well-being is not gained simply by ensuring the absence of illness or ailments. This was recognized as long ago as 1946 in the preamble to the constitution of the World Health Organization, which defines health as “a state of complete physical, mental and social wellbeing and not merely the absence of disease or infirmity.”

We have focused on the ten most common risk ailments that affect individuals, project teams, and organizations, suggesting effective treatments and cures to remedy each ailment. Most readers will have suffered from at least one of these ailments, probably more, and many will currently be struggling with symptoms and outcomes. The treatments prescribed have proved to be effective in addressing these common ailments, and implementing them will help ensure that you and your organization recover from any risk ailments that have afflicted you.

 

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