Taking a reactive approach to risk management means we are captive to limited thinking.
This blog was prompted by a question from a participant in the webinar I ran with Camms Group last month on Risk Reporting: How to Provide Summary in Detail. The question was: “Is risk management reactive or proactive? Risk assessment being about what happened rather than what might happen in the next quarter or next 6 months.”
When I run the RMIA’s Enterprise Risk Management course or my Mastering Risk Workshop Facilitation course I run an activity to make sure participants understand the true purpose of risk assessment (Hint: it’s not to collect a bunch of risks). It’s to ask interesting questions to help people unleash their minds from inherent beliefs and our penchant to believe our plan will work. Because it is our plan after all.
At the same time as pondering this issue I sent this article, How to Mine Synthetic Data: Pros and Cons of a Shiny New Tool for Risk Managers, to my colleague Dr Andrew Pratley to get his views on it. He replied with comments around the uncertainty of “black boxes” built on these approaches, ending with:
“I think the most important point she made was to note that usually big changes are negative and no model will predict this the first time it happens. People need to think about more casual factors than torturing the historical data for answers that don’t exist.”
Therein lies a perfect example of the need to unlock our captive thinking. The trick is identifying how in-depth to go. The more critical the outcome sought, the deeper you should dig into your mind and the minds of others.