Starting off with the word ego creates an image of people with outsized personalities who are full of themselves and don’t allow others to make decisions. It is someone saying, “I am right”, and accompanies the demand that their wishes be heeded. But what I am really getting at is that dealing with risk is an intensely personal activity where people use their own experiences to determine the best way to deal with risk. The challenge is that the personal experience is not the best way to address risk because the “gut” is often wrong, failing to take into account facts that are not within the person’s experience or knowledge.
But what are we missing? For one thing, we are not alone on the road. The speed limit is not just meant for us. Those 14% of the drivers that are below average could also be on the road. And the laws of physics have not yet been repealed. We take on the risk with incomplete information and an incorrect assessment of the negative outcomes, but believe we are absolutely right in our assessment of the risk.
This was not meant to be a lecture on driving, but rather a discussion of the challenges risk managers face inside of organizations. Everyone has their own opinion of the risks they face. It is not the job of the risk manager to take this responsibility away from the business owner. Instead, the risk manager is tasked with assisting business owners with using the proper tools and information in order to assess the risks and plan for the “bad day”. It is a challenge to get everyone involved in the process.
In many organizations, there are still silos of risk management. ERM programs are created although often key areas like credit and strategy are left out of the effort. The C level execs have a belief that they would be ceding risk management to someone with lesser skills and knowledge. They don’t accept that what they are really doing is providing transparency into their areas and allowing others to see the linkage between critical risks. Bringing the unity to risk management is by far the toughest task risk managers have. Egos will never go away.