Appetite Scenarios

Over the last few months, I have been doing some non-risk work with a government agency. When I say non-risk work, they have engaged me not as a risk expert but as an expert in decision making. In part, because of my first book DECIDE: How to Manage the Risk in your Decision Making, and in part due to the new tools I have been developing as I research my new book Team Think: How Teams Make Great Decisions.

As you and I know, risk management is about improving decision making. Yet, it is not always the answer. In the case of this government agency, they had a range of teams making highly complex decisions under varying degrees of uncertainty. While risk comes into it, so too does the mechanics of routine team decision making.

What I have been helping them with is developing decision maps and identifying where decision support tools will enhance the accuracy, speed and consistency of decision making. And lo and behold, while risk assessment was the answer on occasion, most often it was non-risk tools like multi-criteria decision analysis (OK it is a risk tool but most people don’t see it that way) that were needed.

To my pleasant surprise, risk came into it automatically for the teams I worked with in the form of appetite for risk. In particular, appetite for risk under various scenarios.

In the private sector, risk vs reward is often a much clearer picture than in government. Agency staff have the opinions of many, many more stakeholders to look to, to balance and always consider the views of the government of the day. Hence, some of the teams had already developed tools to help them identify the “sweet spot” or “least worst spot” for appetite for risk. These tools combined with a strong capability to develop and consider multiple scenarios quickly is the future for this agency.

Last week I wrote about the need for a focus on scenario planning for your plans for 2022. My message today, is to make sure you remember to have a very clear discussion about appetite for risk under each scenario. Don’t assume. It is very likely to shift, sometimes a lot, from one scenario to another.