The Risk Management Paradox

If everything is going well, no one is lining up to pat the risk manager on the back, but when things go wrong, people are lining up to tell you.

Rod explains how risk managers can make themselves relevant and ensure that what you are doing is adding value to the organisation.

Transcript:

Doctor Allan McLucas wrote in one of his books that risk management has this classic paradox that if everything is going well, nobody is actually lining up to pat the Risk Manager on the back and say you are doing a wonderful job. But when things go wrong, they’re lining up to tell you that things have gone wrong.

So we have this paradox here and part of the problem with that is that it’s very, very difficult for us to measure the outcomes of our risk management program (a subject for another topic). So what we need to make sure as risk managers is that we are relevant. Make sure within the organisation that what we are doing is seen to add value to the organisation.

Here’s a classic example. There was an aquatic centre I worked for where the manager would carry the cash in a calico sack to the organisation’s headquarters everyday. He used to go out, get in his car and drive three kilometres to do it. When we looked at that, there were some risks around the fact that he could get robbed, that he could be severely injured or he could be killed. Not only that, the twenty or thirty thousand dollars he was carrying at the time could be lost.

So we put in some risk strategies whereby we had a Chubb van now come in and collect the dollars. Now the paradox arises with this because we cannot say for a certainty that by doing that, we saved that guy’s life or saved him from injury or saved the money getting stolen. Here’s the paradoxical bit; had we not done anything and the guy got hit over the back of the head with a tyre iron, and lost all of his takings, and potentially was injured or killed, then I can guarantee people would be lining up to ask why that guy was carrying a calico sack full of cash to his car to drive it to the headquarters of the organisation. That’s the paradox.

We don’t want to wait until something has already happened to put a new policy in place. What we want to try and do is avoid it in the first place. But the difficulty is we can’t say for a certainty that what we have done has actually resulted in that change.