Lessons From The Trenches: Lesson #1
In my years in risk management I couldn’t help but identify three constant lessons that keep popping up for me — and every time I ignored one of them I paid for it.
The first lesson? Know the odds.
In everything know the odds, the Gods say!!! In my years traveling as a consultant I often spent a lot of time at the airport. Every time I saw a plane land or take off I couldn’t help but wonder how everything had to go just right in order to make that happen.
Nowadays frequent travelers probably never give so much of a thought to this technological wonder. Passengers, more often than not, are mostly concerned about pretzels, blankets and ever-shrinking legroom.
But I have noticed that pilots, on the other hand, never take any flight for granted. Their caution might seem counterintuitive, because statistically flying has proven to be a rather safe means of transport — safer certainly than train or automobile travel.
Even so, every passenger with an ounce of natural curiosity has listened intently as their flight crew performs its a rigorous pre-flight/post flight checklists. I’ve also observed pilots performing a visual inspection of their aircraft, regardless of the type of airplane or the airport size.
I’d venture to say that the record of safety of air travel hinges upon this meticulous approach to making sure that all the “t’s” are crossed and all the “i’s” are dotted. Plane crashes may be rather rare with the sophistication of technology today. But maybe that’s because pilots and the rest of the crew understand that even one crash is one too many.
For risk practitioners, it would be beneficial to spend the time truly understanding the risks facing their organizations, whether these risks are internal or external. This might mean engaging with management to understand the strategic objectives of the organization. It might mean engaging internal constituents to understand what keeps them up at night.
Plane crashes may be rather rare with the sophistication of technology today. But maybe that’s because pilots and the rest of the crew understand that even one crash is one too many.
Ultimately, it will mean working with external parties such as brokers and insurers to help them see your organizations’ risks from through a shared lens. Only when they have the full picture of the risks facing your organization can risk transfer — if there is a case for it — be tailored to provide the kind of coverage that the organization truly needs.
While understanding the odds does not in itself eliminate risks, it is crucial to the crafting of the appropriate response to any risk that would be onerous for the organization to bear.
This approach, for instance, would help those in charge of risk weigh the facts of their organization’s risk profile on one hand, against its risk appetite in the accomplishment of strategic objectives.
The upside to understanding the odds is that it helps those in charge of risk management in fully grasping the real exposures facing the organization, in understanding from the markets the coverage available or that could be available, and in developing an effective risk transfer partnership and ultimately establishing credibility with the markets.
I’ll cover lesson #2 and #3 in future Risk Insider articles — stay tuned.