The business of risk management

“The business of business is business.”

This quote is often attributed to Milton Friedman, Alfred P. Sloan, and others. It is frequently interpreted as conveying a cynicism that business people are intentionally uninterested in larger issues that impact society. The inference, then, is that business is often harmful to society through this neglect.

For this article, I am uninterested in this debate. Maybe I’ll take that on another time. Instead, I want to turn this around a little bit with the following aphorism – feel free to attribute this to me.

“The business of risk management is business.”

Many people, especially those who have not invested 1000’s of hours working with risk management concepts, want to attribute high and lofty goals to the ideas behind risk management. Risk management, though, has no goals. Risk management is simply a tool. It’s a hammer, a wrench. Tools have no philosophy or agenda. Tools are an invention of those persons who want to accomplish more with less effort.

Similarly, risk management exists solely to help a leader (of any enterprise — not just a for-profit business) accomplish more with less effort. That is, the goal of risk management is to help a business be a better business – no matter what that business is.

Before a craftperson picks up a tool, they already know the larger result that they have in mind and select the tool to help achieve it. This is an exercise in practicality. They do not select a wood plane because the world is fascinated with the concept of wood planes. They select it because it will help them accomplish more with less effort.

So, too, should a business person select the tool of risk management – that is, when it’s the right tool for the job at hand. So, that raises the obvious question. When is risk management the right tool?

I’ll start to address that in my next post.

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