
Rick Piltz (1943-2014), former senior associate in the U.S. Climate Change Science Program in the administration of President George W. Bush. He resigned his position in March, 2005, over political interference in the program. In early June, the New York Times published a story describing how Philip Cooney, chief of staff for the White House Council on Environmental Quality, had revised reports of the Climate Change Science Program to, in effect, sow doubt about the science of climate change. Following publication, Mr. Cooney resigned and accepted a position at ExxonMobil. Mr. Cooney had been engaged in tactics that support risk denial, where the risks in question are the risks associated with climate change.
Photo by Nicky Sundt courtesy GlobalChange.gov.
Discussing risk in general terms is always difficult, because many professions have their own ways of thinking about it. For now, let's regard risk as the chance of losing an asset. We measure the chance as a probability. We measure the asset in units of value.
If the probability of loss in a given time interval is P, and the value of the asset is V, the expected value of loss in that time interval is PV. In a large number of identical trials, our average loss per trial would be PV.
Sound decisions about enterprise resources do consider risk. For example, in estimating a project budget, we might consider the possibility that one of our suppliers might deliver a subsystem three months late. To manage this risk, we might reserve resources to deal with it if it occurs. If the cost of dealing with this event is V, and the probability of it occurring is P, then the reserves required are PV.
That's one example of a strategy for dealing with a risk. Fortunately, it isn't the only strategy available, and in many cases we can do much better. Here's Part I of a summary of the possible strategic options for dealing with risk, emphasizing ineffective (but very common) approaches.
- Denial
- Those in denial are those who reject the reality of the risk event.
- Slogan: "That'll never happen. You're such a worrier!"
- Advantage: Denial lets Those in denial are those
who reject the reality
of the risk eventus feel that preparation is unnecessary, because there's no risk. It can be a comforting illusion, especially for those reluctant to allocate resources to managing risk. - Danger: If the risk event occurs, we're unprepared. Worse, we can become disoriented when we find that our view of the world is fiction.
- Shock
- Shock happens when we're blindsided by the unexpected.
- Slogan: "OMG, nobody could've anticipated that."
- Advantage: If the unexpected doesn't happen, we can remain in a state of blissful ignorance.
- Danger: If the unexpected happens too late for us to take remedial action, disaster is possible.
- Acceptance
- Acceptance is the strategy for those who don't want to prepare.
- Slogan: "That might happen. We'll deal with it then."
- Advantage: It requires no advance resource allocation. If the risk event doesn't occur, no resources are expended.
- Danger: It can lead us to believe that we have less need for resources than we actually do. Acceptance is a prudent strategy only when PV is very small.
- Chaos
- This approach happens when we're so distracted by immediate events that we cannot plan for future risks.
- Slogan: "Heavens! We've been meaning to plan for that. We clean forgot!"
- Advantage: By focusing our resources elsewhere, we do accomplish some tasks. Without a risk plan, allocating resources to risk management becomes unnecessary.
- Danger: If risk events arrive before we can allocate resources to risk planning, the risk response can be inadequate, and full-scale disaster is possible.
We'll continue next time with three more risk management strategies. Next issue in this series
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Related articles
More articles on Project Management:
Quantum Management
- When we plan projects, we estimate the duration and cost of something we've never done before. Since
projects are inherently risky, our chances of estimating correctly are small. Quantum Management tells
us how to think about cost and schedule in new ways.
How We Waste Time: I
- Time is the one workplace resource that's evenly distributed. Everyone gets exactly the same share,
but some use it more wisely than others. Here's Part I of a little catalog of ways we waste time.
Seven More Planning Pitfalls: I
- Planners and members of planning teams are susceptible to patterns of thinking that lead to unworkable
plans. But planning teams also suffer vulnerabilities. Two of these are Group Polarization and Trips
to Abilene.
Cost Concerns: Scale
- When we consider the costs of problem solutions too early in the problem-solving process, the results
of comparing alternatives might be unreliable. Deferring cost concerns until we fully understand the
problem can yield more options and better decisions.
Depth First or Breadth First?
- When investigating candidate solutions to a problem, we tend to focus first on what we believe is the
"best bet." But a more systematic approach can sometimes yield dramatic advantages by reducing
the cost of the investigation and the time it requires.
See also Project Management for more related articles.
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- Although the Dunning-Kruger Effect is widely recognized, people describe it — and understand it — in many different ways. Some of these expressions are misleading. Proceed with caution. Available here and by RSS on July 30.
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