Strategy and Change

6Risk

FOR MANY LEADERS and organizations, risk is considered part of doing business. Executives have become increasingly involved in the oversight of their organizations' efforts to identify, monitor, and manage material threats. As a result, many of these executives would consider themselves to be risk aware and are certainly alive to the fact that risk can introduce both unbudgeted cost and earnings volatility. What they may appreciate less is the dramatic evolution of risk as a professional domain and the business benefits of sophisticated risk management, both in dealing with unplanned events and in strengthening corporate governance.

For some readers, the notion that by managing risk you can create value, rather than just prevent unwanted surprises, may raise a cynical smile. Surely the most value an organization could glean from even the most effective risk management program would be an improved awareness of the risks they face, a reduction in losses, or a more controlled response to disasters. Doesn't the suggestion that managing risk can create value represent a bit of wishful thinking?

Jeff Bezos, executive chairman of Amazon, certainly doesn't think so. A regular commentator on the role that risk plays in the courage shown by leaders, and the bets that they choose to place, Bezos was quoted in late 2024 as saying, “I think it's generally human nature to overestimate risk and underestimate opportunity. The risks are probably not as big as you perceive, and the opportunities ...