Risk is the big word these days in the news, literature and even in Organizational Development (OD) work. Anyone who has gone through a recent strategic planning like process will have been involved with a discussion on risk. However, I think that many of those of us in OD have a superficial notion of risk. We can say the word, but I have not observed very many being proficient in how to deal with risk.
I do not claim to be an expert, but I have being exploring the notion of risk in my OD practice for about 8 years now. It started with my work with a renowned risk engineer, His area of expertise was in the area of large civil structure failure due to various causes. He started off by informing me that our meeting was going to be a waste of time because I would not understand a basic concept in risk – probability.
For example, he said: “Do you understand the notion of 1 in 1000 year flood?”
Fortunately for me, I was able to provide a satisfactory reply and the meeting proceeded to a fruitful conclusion.
My interest in risk is not to replicate the work done by engineers, actuaries, arbitrage/hedging practitioners, and other sophisticated people in this field. Rather it is to arrive at a OD centric notion that would allow practitioners the opportunity to apply risk management to the various activities that OD practitioners get involved in. Also, a key feature in my efforts would be: the ability to apply risk management concepts in practical ways to the myriad decision issues that people face from all walks of life.
My journey has been very idio-centric, because the OD literature has very little to offer and the literature from other fields is focused on those fields’ issues and is often very technical in nature. Of course a number of important thinkers have influenced my current level of understanding: Nassim Nicholas Taleb (The Black Swan); David Apgar (Risk Intelligence); Hammond, Keeney & Raiffa (Smart Choices); Peter Bernstein (Against The Gods – the Remarkable Story of Risk); Dan Gardner (Risk); Dan Ariely (Predictably Irrational); and many others in more specific ways.
A number of key insights that have come my way:
- The traditional notion of the Risk Cube is a helpful device: X axis – event consequence severity; Y axis – the event’s likelihood; and the Z axis – costs/effects of mitigation.
- We should not just talk about risk, we should incorporate the notion of uncertainty too. More situations that (or we care about) impact us are better considered as “uncertainty” type situations than risk ones (I will use the acronym of U&R to indicate this learning). The notion on focusing on ways to manage uncertainty is a major insight for for my OD practice.
- U&R is a uniquely human concept: unless there is someone who cares, there is no U&R circumstance. This means that U&R has to be “personal” to someone. The intriguing (for me at least) corollary is: it may not be personal to someone today, but it could be tomorrow. This insight has had a major impact on my OD practice.
- U&R is there in all choices and circumstances. Our degree of freedom extends only to what U&R we will accept in our lives. This insight also has had a major impact on my OD practice.
- We are decidedly biased to avoiding loss than achieving gain (i.e., we often would rather avoid “potentially” losing $1.00 than gaining $5.00).
- It is often better to consider U&R in the comparative rather than the absolute sense, witness the following story:
Two hikers in the woods meet a very angry bear. They both start to run. After a bit they start to tire and one hiker says to the other” “We cannot possibly outrun the bear.” The second hiker says to the first: “I only need to outrun you!”
- U&R is situational, even when different people face the same event. You and I may have the same threat in our lives, yet we will not be equally exposed to the threat’s consequences. The whole notion of “comparative advantage” is contingent on this insight, hence it has had significant impacts on my OD practice.
- Our respective mental models about the world affect our exposure to U&R.
An effective operational notion of U&R in OD work can provide advantages in such areas as: assessing current state U&R; assessing options for their cost/benefits AND their U&R profiles; establishing more effective implementation planning. For those of us who do more “counselling/coaching” related OD work the benefits can extend to helping clients better appreciate how their mental models lead to predictable U&R exposure in their lives.
As for the impact on me, I have become excited at how my inquiries into U&R has enriched my personal and professional lives.
Over the next number of BLOG postings, I will go into these insights and share how they shaped my appreciation of U&R and how I have developed a series of strategies to deal with them.
I would be fascinated at some of your insights and questions.