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Risk appetite

If we don’t understand ourselves and our own attitudes to risk, how can we be sure that we are making the right decisions when it comes to managing organisational risk?

In recent weeks a news story has shook the world of mountaineering.  A member of a rock climbing group ascending K2, the second highest, and some say the most dangerous mountain to climb in the world, decided to leave the group and attempt a solo climb.

People that make a career out of extreme activities don’t normally take high stake risks and this must be one of the greatest risks a mountaineer can take.  The potential for harm dictates careful planning, strict organisation, and a series of gates that denote go/don’t go decisions.  These range from sponsorship, equipment selection, trialling and preparation, as well as factors like the weather conditions on the day.

In group activities, individual decisions don’t only affect one person, but put the whole group at risk.  Across a group, every member has an important role to play, and whilst good training means that others can pick up extra duties in an emergency, in practice the person assigned the responsibilities is selected because they are recognised as having expertise in that field.

What has this got to do with risk appetite?

Getting out of bed in the morning can feel like a risk for many of us, but if we live a very safe life we run the risk that we develop an academic, cautious, or unrealistic and unhealthy approach to risk.  If we are too cautious, we can end up putting excessive barriers in place which in turn can encourage the very people we are trying to protect to cut corners.

Engaging in activities that carry greater risks give us a better understanding of the pressures and behaviours that face others when facing risk.  For example, everything I read tells me that if I find myself suddenly facing a shark, I should stand my ground and bob it on the nose.  If I am honest, I am not entirely sure that I could do that.  I don’t know whether that is something that is easy to do or hard to do, or whether the people I work with could do that.

I do know from personal experience that when I am ejected from a Land Rover in the middle of nowhere in the middle of a particularly cold night that I can summon up the focus and determination to work out where I am, where I am going and how to get there.  That tells me that when the pressure is on, at least some people can find the necessary resolve to do what needs to be done.

More than that, when I am discussing risk with those that are facing danger, I can speak from a position of knowledge and experience having dealt with both the risks themselves and the consequences of disaster first hand.

Finally, it can be hard to establish credibility amongst those taking risks if you don’t have the knowledge, skills or experience to back that up, and that can be equally dangerous.

But there is a counter argument to that approach.  People that work regularly with significant risks are likely to under-estimate the potential harm from lesser risks and may be more inclined to accept a higher risk threshold than might be considered reasonable.  Organisations that have high process safety risks may underestimate risks associated with slips, trips and falls.  Fleet based technical service firms may focus on the inherent risk of the activity and lose sight of the driving risk – even though driving may be more likely to cause more serious harm.

Where does that leave risk assessment?

The normal approach to risk assessment is to consider the hazards, estimate the risks, and identify the control measures.  We quite often disregard the human effect in the process.

Having self-awareness when it comes to risk helps us to ensure that we understand the effect our risk appetite has on our actions.  Understanding the risk appetite of others helps us to understand what controls are likely to be adopted in the field and understanding (and shaping) the risk appetite of the organisation helps to assess residual risks against defined acceptability.

Written by John Huckstepp M.Sc., SFIIRSM, CFCIPD, Tech.IOSH, author of the 2018 IIRSM Futureproof Programme and speaker at the IIRSM Conference 2018.

Tomorrow's risk and safety landscape - ARE YOU READY?

IIRSM is developing a new training course, Futureproof, on dealing with uncertainty in a changing world.

In a world full of risks and opportunities, how do you know which ones will have the biggest effect on you and your activities?

How organisations react to risk and opportunity is directly linked to an organisation’s sustainability, culture and the health and wellbeing of the workforce as a whole.  We are currently undertaking a survey of risk appetite, the results of which are being used to help develop Futureproof - You can participate in the survey by following this link.

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IIRSM’s conference will show how evolving global social, political and technological trends impact individuals and business success and give you the skills and information needed to thrive and succeed.  The conference will help delegates:

  • Understand and respond to individual risks and their interconnections
  • Deal with the changing nature of the world and the speed of change
  • Future-proof both ourselves and our organisations
  • Build resilience to protect against the unforeseen and unknown.

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