Risk Management

by Peter Parkes

What is risk?

If you don’t risk anything then you risk even more.

Erica Jong

Fundamentally, risk is the uncertainty inherent in the world in which we live and do business.

The consequences of uncertainty can be good or bad, but people usually think of managing potential negative impacts. The ‘good uncertainties’ are the opportunities that cross our path on a regular basis.

The art of life is balancing investment in opportunity against acceptable risk. In order to do this we need to understand risk better.

Risk or issue?

A good working definition of an issue is that it is a risk with 100 per cent probability of happening; that is, an issue is a risk that has come home to roost. The fact that we spend so much time in management talking about issues is an indication that we tend not to be proactive and plan for events, but still remain largely reactive once they have happened. The risk management process helps you to become a more proactive manager – less of the fire-fighter and more of the general.

Once a risk materialises into an issue, it sometimes precipitates a secondary set of risks; in other words, we may not have certainty of the future in this new scenario.