How many risk registers cause the right level of preventive action against known risks?
I am sure you share my sympathy for the victims of the huge and destructive hurricanes that have devastated the Caribbean and USA recently. I don’t know how many of you are seriously concerned (as I am) about the general worldwide response to such risks.
The weather here in Saskatchewan is very similar to a typical autumn back in UK, but was a sharp contrast from travelling via Madison, Wisconsin where there was a very unusual 31° Celsius. I notice significant changes in our seasons back home. It doesn’t matter to what extent you believe climate change is man-made: it is real. But how should societies and organisations (and families!) react to increasing risks to them?
An interesting phenomenon is the “risk perception gap” that often occurs to an individual or a group. This is not only at work; people are notoriously unpredictable in their inconsistent response to risk, e.g. driving, adrenaline sports, money, sex, power or pension provision.
Despite various techniques, even experts can mislead themselves because of their surroundings or context. This can arise from peer pressure (e.g. group think, such as social media ‘echo chambers’) or experience preventing recognition of new data or change. I do not present myself as an expert so you might like to visit these links (or do your own research - there is much material):
- Why the public understanding of risk matters
- Winton Professor of the Public Understanding of Risk
I worry when I see flood risk being calculated on a “1 in 50 years” event. Is that the last 50 years or the next 50 (adding in trends of weather and likely sea level)? Yet societies allow or encourage developments on known flood plains. Manhattan is an expensive area of real estate, with powerful residents. Despite the evidence, little has so far been done to guard against a serious storm surge, which threatened a flood only a few years ago. This is only a high profile example; numerous similar risks exist all around the world.
Arguably, I am being insufficiently critical! Risk can refer to uncertainty (the other side of that coin is opportunity, by the way). But sea level rise is not uncertain - the rate of sea rise may be unknown but the trend is not.
Our profession talks about avoiding short termism. In the timescales of the necessary work, why are we not asking ourselves ‘is London in the right place’? The real answer, of course, is that some problems are too big to contemplate comfortably. Or, to put it another way, the return on investment is not possible before the next election. In a business or sport context, the return will be beyond the tenure of the CEO or Team Manager. However, if salary and incentive packages were structured to reward only longer term success, this would change.
So, do our children matter? If so, we had better start thinking differently. Will ‘Houston’ facilitate such change?
The real risk is that we feel powerless to change things. The encouragement could be that making such changes over a longer time is more manageable and affordable.
Whose job is it to think the unthinkable? What should asset management contribute?