Smart Risk Management

4

Step One—Define Risk

The first step is always the hardest.

After reading this chapter, you should

• be able to test your definition of what risk is with others.

• understand why the company’s leaders must establish the corporate definition of what is risk every year.

• recognise the limitations of trying to purchase insurance to cover every risk.

There is a saying that goes, “Talking about bulls is not the same as being in the bull ring.” Therefore, we must grab the bull by the horns and face the situation. This, in essence, is step 1.

Exercise: Defining Risk

1. Write down the phrases or terminology you would use to define the word risk. Risk is ...

2. Write down the phrases or terminology you would use to define risk taking. Risk taking is ...

3. Next, ask a friend or colleague to define his or her definition of risk and compare your definitions. You will see that there is some terminology that is similar and some that is different. Write down any similarities you see.

The point of this exercise is to demonstrate that there are numerous ways for people and professionals to see and define risk.

The goal is to jump-start the process of gaining a consensus on a commonly acceptable definition of what is risky and what is the cost we cannot afford.

How others define risk (the most common answers): Risk is ...

• “Doing something different.”

• “Going outside my comfort zone.”

• “Scary.”

• “Worth the effort.”

• “Something that has an upside and a downside.”

• “Putting something valuable on the line that ...