Are you afraid of anything? Perhaps if you can’t name something you fear or dread, you can think of someone who has such an anxiety. For example, there are many people who are afraid of flying and who go to great lengths to avoid aeroplane journeys. With the state of our national security, there is increased fear of kidnappings and physical attacks.
The irrational fears that people have are many and varied; fear of heights, fear of dark lonely roads, fear of open or enclosed spaces, reptiles, dug wells, underground tunnels, forests (no thanks to Sambisa!), manholes, birds, elevators, escalators, dentists, blood, doctors, rats, dogs, cats… and the list goes on.
Irrational fears are about perceptions of risk. The height represents a fall, lonely roads are hideouts for robbers, open spaces expose you, closed spaces compress you, reptiles can kill, you can fall down a dug well, get lost in a tunnel or forest and never be found, fall down a man-hole – I think you have got the picture. Fear is often perceived as risk, with the notion that risk represents a real and present danger. Our minds have built up associations based on stories or films or previous adverse experiences with a skewedperception of risk as harm. More than that, the sense that your safety is in other people’s hands, that it’s out of your control, is often behind irrational fears like fear of flying.
For instance, in the wake of anair tragedy, some travelershave been known to switch from flying to driving – leading to a drop in air passenger traffic while road use surged. But after having to deal with road check-points, accidents and long traffic delays on the expresswaysmost people return to the skies.Available statisticsindicate that flying is faster and safer than driving long distances.
So risk management enables us to put a structure and framework around the unknown or what we fear, bringing it within control. To understand if there is a rational approach towards risk, we will examine one of the classic definitions of risk;Effect of uncertainty on objectives. Note that an effect may be positive, negative, or a deviation from the expected. Also, risk is often described by an event, a change in circumstances or a consequence (ISO Guide 73
ISO 31000; 2009)
This definition helps us to think further about risk than we have addressed it thus far; we know that risk can be a combination of likelihood and impact, and that it can be positive or negative, but we are now looking at the effect of risk on objectives; and the fear that lurks in the shadows. When we are looking at the management of risk or what we call risk management, we are looking about identifying, analysing and responding to risk in the context of those objectives.
The standard definitions of risk management are not so uniform as those for risk, but in the main there are references to the ‘processes’ or activities behind identifying, analysing and responding to risk;Coordinated activities to direct and control an organisation with regard to risk (ISO Guide 73 ISO 31000).
This short treatise leads us to the concept of ‘enterprise’ risk management. We will tackle this in depth in a later article, but it’s worth saying that enterprise risk management or ERM is risk management for the whole organisation – i.e. enterprise wide;
Imagine that you go to the doctor with a bad neck, your back hurts and you are getting headaches. The doctor gives you some “Panadol” and tells you to come back if you don’t get better. At a visit to your mother at the weekend, she looks at you and asks how long you are spending at the computer each day. She can see you squinting in bright light and she observes the heavy bags under your eyes and tells you to do 10,000 steps outdoors each day for one month – and she’s going to check that you do it. You do as you are told, because you always obey your mother, and like a miracle, by the end of the month not only have you no aches and pains, but you are sleeping better and being more successful at work. Both your mother and the doctor exercised the same process of analysis, but the doctor couldn’t make the connection between the ailments and other non-verbalised issues so he treats the particular issues. Your mother made the connections and she treats the whole body. Enterprise risk management is the treatment of the whole body, whereas risk management deals with the particular risk area.
This is why sometimes risk management is misunderstood; some people think it’s just about health and safety, or fire prevention. Others think that it’s about protecting the computers or data. If you ask someone in finance what risk management is to them, they would respond in terms of delegated authority levels and segregation of duties, someone in Human Resources would argue that it’s about taking up references and checking people’s backgrounds. Risk management is all of those …… and more. Enterprise wide, it is about treating the entire organisation, mapping the risks, their interconnectedness, and finding those risk responses that affect each part of the business. It’s about managing the unknown, and overcoming fear by controlling it.
How do we overcome the fear of the present economic recession digging deeper and making daily life more difficult? We need to tackle the root cause of what led us to this sad state of affairs. Our dependence on oil as a main source of revenue is not entirely bad. The problem is that we did not react quickly to the oil price shock. There was no framework to foresee this danger, and therefore there were no quick responses. Will Nigeria be better in the long run? The answer is an outstanding YES, if we learn from this and put the right measures in place now.
So fear is all together not bad. It could be a pointer to risks. We must embrace risk, and do the uncommon if the opportunity presents itself. Failure is a great learning opportunity.
The risk management approach to controlling fear of the unknown is to strip away the fear and start with the rational basics, and then we can get to the root cause of what the problem is, strip it away or deal with it, or isolate it or change it or flip it into an opportunity.
With these steps, we can rise from fear of the unknown and then begin to build success.
· Mbonu, studied Engineering, is an experienced Banker and Enterprise Risk Management professional. Has undergone post graduate studies in Risk Management at Stern Business School – New York University, and is a member of the UK Institute of Risk Management. Can be reached on 09092092046 (SMS Only); email: firstname.lastname@example.org