Risk e-Views Vol 7 April 2011 – Risk Leadership: Knowledge is Power

When we conduct risk assessments we are often satisfied with the outcomes based on our existing knowledge. Our knowledge however is usually based on some facts and a whole lot of assumptions, perceptions and theories.

As human beings we use our five senses of sight, smell, taste, touch and hearing to maximise our knowledge about our environment. During a risk assessment we need to find similar tools to make sure we maximise our knowledge to help ensure we identify and appropriately analyse risks, opportunities and design effective risk treatments.



Here are a few tips to consider when conducting or participating in your next risk assessment:

Assumptions – A first point of call is to make sure you identify key assumptions and validate them as well as you can. Beware of senior people pulling rank because they believe this is what worked best for them – it may no longer be valid in our fast changing world. Similarly we can have assumptions that everyone is aware of, but no one in the room can identify where the assumption originated from – you will need to do some digging.


Perceptions – Perceptions can vary between people for a myriad of reasons. Our socio-economic, ethnic and geographic backgrounds, just to name a few. A big issue in risk assessment is when we all have a common perception of a subject matter or issue that is wrong because we all have the same underlying drivers of perception. The best way to combat this is to make sure you involve a variety of people in a risk assessment. Don’t limit participants to those intimately involved with the subject. Invite “outsiders” that are likely to have different perspectives such as inviting a sales rep into a risk assessment of a back office function.

Theories – I advocate a scientific approach to analysing the theories present in a risk assessment. Scientists establish theories and then try to disprove them. They design a multitude of experiments that should, if successful, disprove the theory. If they can’t disprove it they become increasingly comfortable with the theory as being a fact, without ever being able to prove their theory 100%. Similarly in business, we can never guarantee the success of a new product, for example, but we can certainly increase our knowledge and hence our comfort levels by challenging the original theory with a few well designed “experiments”.