The Risk Doctor's Cures for Common Risk Ailments by DAVID HILLSON

Author:DAVID HILLSON
Language: eng
Format: epub
Published: 2014-03-19T16:00:00+00:00

Long-term treatment options: Change diet and habits

The short-term treatment for risk obesity involves the risk equivalent of “losing weight” by reducing overall risk exposure to a level that can be managed within the risk capacity of the organization or project. Long-term treatment requires a change in risk-taking behavior to ensure a more balanced risk diet, so that a more healthy level of risk exposure can be maintained. This means developing new risk-taking habits when the target level of risk exposure is reached, through our risk culture and risk management approach.

The details of a balanced risk diet will be different for each organization or project, and the degree of risk exposure will need to be monitored carefully to ensure that it remains within acceptable bounds. We need to be aware of our risk appetite and manage it proactively on a daily basis: Do we feel hungry to take on more risk? Is that appropriate now or should we resist the risk-seeking urge? Are we getting a balanced risk diet, including the right range of opportunities that will promote healthy growth? Is there an area where taking on more risk or a different type of risk would bring useful rewards?

We have seen that the acceptable level of risk is defined by setting risk thresholds against each objective; these thresholds need to reflect the organizational risk appetite. We then need to ensure that we review each decision that involves taking on additional risk, whether it is changing strategic direction, launching a new product or service, changing the composition of our portfolio, or determining tactics for project development and execution. In each case, we need to ask whether the amount of risk we are taking on will cause us to exceed the risk threshold. If it does, then we must have effective measures in place to absorb that risk without disrupting the overall health of our project or business.

By clearly understanding our risk appetite at the corporate and project levels, expressing that risk appetite through quantified risk thresholds for each objective, and monitoring risk exposure to ensure that we stay within these thresholds, we can develop new and healthier risk-taking habits that prevent a return to risk obesity.

The 2014 Future Diets report from the Overseas Development Institute notes that the number of overweight and obese adults in the developing world has almost quadrupled since 1980 to around one billion. Obesity is one of the leading preventable causes of death worldwide. Some studies suggest that obesity causes about 300,000 deaths per year in the United States and over 2.5 million worldwide. The good news is in the word “preventable.” Fortunately, the same is true of risk obesity. Its effects are serious, but good treatment options are available. These include both short-term actions that enable us to shed risk exposure in a controlled way to regain control of the situation and long-term measures that ensure that risk exposure stays at a healthy and manageable level.

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