The Failure of Risk Management, 2nd Edition

CHAPTER 8Worse Than Useless: The Most Popular Risk Assessment Method and Why It Doesn't Work

Many are stubborn in pursuit of the path they have chosen, few in pursuit of the goal.

—FREDERICK NIETZSCHE

First, do no harm.

—AUGUSTE FRANÇOIS CHOMEL

Contrary to popular belief, the phrase “First, do no harm” is not actually part of the Hippocratic Oath taken by physicians, but it is attributed to other works of Hippocrates and is considered to be just as fundamental to medicine as the oath itself. The developers of the most popular risk management and decision analysis methods should also make this their most important principle. But because their efforts to develop these methods are often undertaken by practitioners isolated from the decades of research in decision-making and risk, this principle is routinely violated.

If you are one of the first three of the four horsemen of risk management discussed in chapter 5, then you might not be at all familiar with some of the most popular risk management methods promoted by management consultants and international standards organizations. These methods often rely on some sort of qualitative score and they come in a variety of flavors. They are easy to create and to use and, therefore, they have a large and rapidly growing body of users.

As we revealed previously, these simple scoring methods are used to assess risk in terrorism, engineering disasters, and a range of business decisions. They are often in the form of a risk matrix that ...