This is the first in a series of posts that attempt to get to the essence of risk management. I’ll touch on various topics as they occur to me. Some of these posts will be on broader topics like this one. Others will be on very specific points that help you implement these concepts. As time goes on I hope to amass a series of short thought-pieces that help bring together a rather complicated subject.
The key word, of course, is “risk”. Risk is a synonym for uncertainty. It’s unpredictability. Risk is the uncertainty of whether you’ll safely cross a busy street. Risk is the uncertainty of your body’s reaction to medication. Risk is the uncertainty of investing your money and getting the hoped-for return. Risk is the uncertainty of a strategic initiative delivering the expected results. Risk is the uncertainty of your town’s first responders arriving at a fire in time to prevent a catastrophe. Risk is the uncertainty of your sports team winning today.
This topic – the first one – is on risk management in general. Let’s start with the big question. What is risk management?
To answer that question, I will first avoid recapping all of the authoritative descriptions. Many of the definitions and explanations lead to over-complication. I prefer to keep it simple. As a business person, my point of reference is always centered around organizational results. In that context, risk management is very simple. It is the group of organizational activities that try to improve results by making the unpredictable a little more predictable. It’s that simple.
Managing risk is simply taking steps to make each goal a little more certain. Whether it’s crossing a busy street, taking medication, or any of the other examples mentioned above – risk management consists those activities that eliminate uncertainty to help you get what you want and avoid what you don’t want.
With this understanding of risk at its simplest and most fundamental level, I will explore the essence of specific parts of risk management in future posts.