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.

An example of this is the propensity for people to drive above the posted speed limit (also known as speeding).  The first speed limit law was enacted in Connecticut in 1901, 115 years ago.  Since then there has accumulated a vast sea of data that has led to the current speed limits used throughout the United States.   The average American makes two trips and drives 30 miles per day.   Time saving for these average trips is in reality miniscule.  So, why do we speed?It all comes down to self-assessments and experiences.  First, according to a survey conducted in May 2016, 86% of drivers think they are above average drivers.  I’ll let you interpret what that means.  Second, our experience comes into play.  We didn’t have an accident the last time we sped and maybe we didn’t even get a ticket.  So our experience is positive.  We know the car we drive can handle the faster speeds because the speedometer does go well past the posted speed limit.

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  And the laws of physics have not yet been repealed.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.