Posted initially on LinkedIn: Claudia Craia
The notion of risk is an abstract one for many people. Because they cannot imagine what their life or business would look like if that risk would materialize, they cannot make the correct decisions to address it.
More than 10 years ago, I was the Internal Audit Manager of a team in Bulgaria, while I was living in Romania, in Bucharest.
For several reasons, I preferred to go by car when I went to Sofia to meet my team. Sometimes I arrived on Monday morning and, on Tuesday evening, after the working day, I was driving back to Bucharest. The drive was about 5 hours, 190 miles.
My colleagues tried to make me change my mind. To stay one more night and leave the next morning. They told me I was too tired, that we could take the opportunity to talk a bit more, that there is simply no point in driving back that night. Words of good faith, but vague, which did not reach me.
Until one day, when our Head of Sales back then told me:
“I understand why you want to return to Romania tonight. Have you thought about what you will do if your car breaks down on the deserted roads of Bulgaria, at night, in the countryside?”
At that moment, some less pleasant scenarios passed before my eyes. Really scary.
Only then did I truly understand the risk I was exposing myself to and I stayed in Sofia.
I never again went back home in the evening, unless I was accompanied.
The same happens in business with risks. If those risks don’t seem real, if you can’t make the person making the decision imagine the consequences, they won’t make the best decision.
In risk assessment, three things are important:
💡 The risk, the anticipated event, must be described and understood as best as possible. Root cause, trigger event, impact in the business.
💡 The risk must be exemplified, imagined. It must feel real.
💡 Then follows the question: “Now that you know the risk, you can visualize what would happen to your business, following the materialization of the risk. What would you do now so that the worst scenario doesn’t happen to you?”
Risk management well done is a powerful business process and can support you achieve your strategy.
