What's Wrong With Risk Management

"The menace of global terrorism has been labeled the greatest threat to western civilization since communism and yet swimming pools, peanuts and lost deer kill more Americans every single year."

Paul Joseph Watson

Risk management is working extremely well for homo sapiens as a species. We have pretty much beaten plague, pestilence and poverty; or at least made great inroads into them. By most metrics, the past few thousand years have shown steady improvement. Our world is safer and we are living longer, healthier lives than ever before. Global warming, artificial intelligence and the pace of technological change among other issues present significant risks of course, but death rates due to our traditional existential threats such as disease, war or malnutrition have been dropping steadily. Despite the prevalence of reporting in the media, and the occasional reversals, the overall trend is that we are living longer, with less warfare, fewer murders and less inhumane practices than anytime in recorded history. In 700 pages, Steven Pinker’s book, The Better Angels of Our Nature: Why Violence Has Declined argues effectively that there has been an extraordinary, but little recognized, long-term worldwide reduction in all forms of violence stretching back at least 12,000 years. The Human Security Reports agree with this view and the 2015 Global Hunger Index goes so far as to say that “Calamitous famines, which are famines that kill more than one million people, seem to have vanished."

So if we are doing relatively well in managing our major risks, what then is wrong with risk management? Two reasons I would suggest:

1. Few improvements in mortality or quality of life are due to risk management as such; and,

2. The quote by Paul Watson pretty much sums up the average person's risk management approach.

Improvements in mortality owe less to our application of risk management principles than to improvements in sanitation and hygiene. Our improved ability to manage conflict in non-violent ways, meanwhile, owes little to formal risk management but much to the increasing human and financial costs of war. Certainly, our ability to cooperate as a species has helped and in many respects, the rise of science has been due to the increase in our population density. This, in turn, may be due to the agrarian revolution. But simply having more researchers will generate more data; which in turn is likely to generate more benefits.

The challenge for us, however, isn't finding enough data; it is how we choose to use it. We are pre-disposed to making risk decisions based on emotion rather than science. It took us most of the past 100 million years to develop a wonderful risk management system known colloquially as the ‘fight or flight’ response. Originally described by the Harvard physiologist Walter Cannon, this response is hard-wired into our brains and represents a genetic wisdom designed to protect us from harm. This mechanism lives in the limbic system of our brain and when stimulated, initiates a sequence of nerve firing and chemical release that prepares our body for running or fighting. So far so good. An ideal system for defending ourselves and our clan from attack or avoiding the sabre tooth tiger.

Fight or flight

The hypothalamus is controlled by the Amygdala, a part of the Limbic system which in turn is responsible, among other things, for the processing and memory of emotional reactions. It’s only the size of an almond, and yet it has the ability to take over control of the entire body with its stored impulses. Unfortunately, we live in a vastly more complex world than our ancestors. We operate cars and computers, ingest artificial carcinogens and face issues of climate change, healthcare budgets and many more risks which the limbic system isn’t equipped for. Luckily we have another risk management system called the neocortex which is well suited to complex analysis, logic and statistical modelling that we need to deal with modern risks. At 2 to 3 million years old, however, the neocortex is still in the beta testing stage. If both these systems played together nicely we wouldn’t have a problem. But the reality is that they generally don’t. The ancient system where we make decisions based on emotion (feeling) is lower down the brain stem and it’s fast, fast, fast at making decisions and reacting. The neocortex (reason) needs data and time to make an assessment and is a more complex piece of work generally. ‘Feeling’, therefore, is in prime position to hijack our 'reason' and take over our risk management decision-making – and usually it does. Always using ‘reason’ to assess risks is possible but it takes training and discipline.

So, what's wrong with risk management? Simply that we make most of our decisions based on emotion rather than nice logical frameworks such as ISO31000 or analysis using complexity theory and the like.

Not convinced yet? OK. Fair enough. Have a look at the slightly tongue-in-cheek adaptation of the Department of Homeland Security Threat Advisory Level and see if the ratings align with your colleagues' perceptions? Or with your government's annual budget allocations? Or indeed, with your personal spending on nutrition, exercise and education?

Adaptation of DHS Threat Advisory Level

If it were just a matter of missing a swim because we are scared of sharks, we really don't need to care. But there is more at stake here. Big decisions are made by humans. Our political leaders have learned to exploit our fear-based decision making and, as a result, there is public support for allocating vast resources to initiatives such as the ‘war-on <insert name of current perceived crisis>’ yet little support for often far more critical issues, such as climate change, artificial intelligence and heart disease to name but a few.

I don't like to leave things hanging without a good solution so please see next weeks article for my 'How to improve risk management'.