Thursday, August 20, 2020

Assessing risk

Most of us -- that is, all but the few formally trained in risk assessment -- really suck at risk assessment, a necessary first step toward managing risk.

Why so?
Bias, for one thing. Confirmation bias being a biggie: we all want confirmation that our thinking, experiences, and instincts are right for the situation we find ourselves in. But, of course, we know objectively, even if not internalized well, that confirmation bias is one we want to avoid.

Optimism, for another. We don't apply objective analysis very well. The "cone of uncertainty" that PMs read about so often is really a cone of optimism. The further out in time, the more we assess a risk optimistically. For one thing, objectively we can say there is more opportunity, given time, to do something to mitigate risk. So why not be optimistic?

Along with optimism and opportunity, add a sense of control. If there's time to react, to study alternatives, and to experiment with mitigation, then of course we can rightfully feel in control of the situation. The reality may be, however, that things are out of control and we just can't accept that idea.

Accept it, and move on
And, then of course, there is the number one thing you can do about a risk: ignore it! Most are inconsequential in the big picture, and so ignoring them is justifiable as a way of only keeping the important stuff in front of you.

And, so ignoring the risks in front of you, you may convince yourself you can live with the risk, as most of us do with most of what we confront day-to-day. But, of course, you could be quite wrong: living with the risk may well be the worst thing you can do.

You'll have to think it through to know, of course.

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