Introduction to risk – what is a risk?

Every day, you wake up to pursue your dreams and aspirations. Unfortunately, some events could happen at any time and adversely affect your ability to achieve your objectives. For that reason, preparation is critical to increasing your odds of success. Take an example of a simple weekly appointment.

You plan to be at your workplace by 7:50 AM to attend the 8:00 AM weekly priorities focus meeting with your team. You know the journey normally takes you about 60 minutes. You set off from home at 6:50 AM to beat the morning jam. Midway through the journey, you find a check signpost, and your car is signalled to pull aside. The traffic offers asks for your driving permit and proof of COVID19 vaccination card. You are surprised because for the past two years you have driven along the same route, without being asked to produce proof of vaccination card.  You are then informed you cannot proceed without meeting the requirements. You realise you are not able to arrive in time for your weekly meeting appointment. Any event that affects your ability to achieve your objectives and goals, is a risk. The effect could be positive or negative. In business as in life, the focus is always on negative events that bring adverse impacts on objectives. It is easy to cope up with windfalls, good surprises and chance cost savings or incomes.  For that reason, there is limited discussion on managing the upside or risk or uncertain events that bring positive outcomes.

The International Standard Organisation (ISO) 31000:2018, defines risk as the effect of uncertainty on the objectives.” The standard provides best practice guidelines on risk management which any organisation regardless of size or industry can adopt and apply.

An event like a police checkpoint may be expected. However, the requirement to show proof of vaccination to continue your journey may not. You could not have expected it. The more uncertain or unpredictable an event is, the more difficult it is to anticipate and manage it. Just like the world was caught unawares by the Coronavirus pandemic, you could easily find yourself helpless. In that case, your ability to be resilient comes in handy.  The probability of an event ranges from 0 to 1 (100%). A virtually certain event like the death of any living thing is given the probability of one (1).  An event like scrapping all kinds of taxation and tax systems in all countries will never happen. Such even has a probability of zero (0).  All other events have to be assessed and assigned a probability value depending on their chances of occurrence. For that reason, great risk managers understand the context of the environment in which they operate.  The effect is the severity of the event on your objectives.  For example, how long you are held up at the checkpoint will affect your appointment timing.  If you are delayed by 2 hours, the impact is so big. You will find when the meeting has ended.

However much preparation you could have put in, it might be very difficult to overcome such a situation. Usually, traffic checkpoints are for driving permits, vehicle third-party insurance and condition. For the first time, you are asked to present a COVID19 vaccination card! You are therefore unable to achieve your objective of making it to your appointment in time. Without your objective being threatened, there would be no risk. If you did not have an objective of arriving at the office by 7:45 AM to attend the 8:00 AM meeting, even if you are held up for the longest time, you wouldn’t say the risk is impactful. Nothing is being threatened.

Before the Coronavirus global pandemic, many leaders had big ambitions of expansions into new markets, creating capabilities to win and innovation to serve customers better. The pandemic happened and the world was disrupted. Uganda went into a national wide lockdown in March 2020. Many of the plans were adversely affected. No analytical model could have predicted the pandemic and its potential impact because we have not seen something like that almost in a century.

The pandemic exposed people’s livelihoods, businesses and many projects to failure. It was a wake-up call for leaders to appreciate risk management.

In the next section, we take you deep into risk management from a practical point of view.  For more insights into risk management, look out for the upcoming book titled “Your Role in the Coronavirus Risk Management” by Mustapha B Mugisa. Visit www.mustphamugisa.com  to place your order for the same or buy the book,  How to Get on the Board and Add Value.

Copyright Mustapha B Mugisa, Mr Strategy 2022. All rights reserved

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