Gaia and Andrew Grant, Directors of Tirian, provide a personal perspective on risk management from their home and office compound in Jimbaran, Bali.
On Oct 1 at 7:50pm suicide bombers attacked a row of family restaurants on the beach barely 20 metres from our property. We visit those restaurants daily. Fortunately (due to a strange twist of fate, as it turns out) we had decided to bring the children with us to a work project in Thailand. So we were saved from the direct impact of the bombs.
It still ended up being a tough week for us sitting in Thailand watching our backyard make the headlines on BBC and CNN. And it was so much tougher for our staff at home, who were there on the scene witnessing the carnage and the chaos, bloodied from assisting the wounded. They could not eat or sleep for days afterwards, haunted by the horrific images and the shock of realization that they had been so close to ground zero. The impact of the incident will no doubt be deeply felt for a long time to come.
We have been, once again, confronted with the challenges of assessing risk. A topic that all of us have to deal with in business every day is now one that we have to deal with personally. It is, unfortunately, something that people all around the world are now taking a lot more seriously…
The new realities
Times have changed, and we have to adapt to the challenges that may lie ahead. In order to be able to make personal and business decisions – and in order to be able to lead groups and organizations through times of crisis – assessing, managing and adapting to risk will need to become an important priority for the future. The presence of mind to judge situations objectively and make rational and fair decisions, the confidence to adapt and react to change, the wisdom to consider potential actions and their consequences: these will be the defining qualities and abilities for the next generation.
It will now be important to remain manage optimistic, in order to continue to progress and move forward positively, in the face of these ongoing challenges.
Mosquitoes vs leaches
While the family was in Thailand we took some time out to go rock climbing in the jungle. Just when we had trekked into the depths of the jungle and were ready to rig up for the climb, I heard a deathly scream from my daughter. Panicked, I ran towards her to assess the situation. She was hysterically pointing to something on her leg: a leach. Coming from a girl who is often unconcerned about mosquito bites, this behavior struck me as ironic. Leeches are actually used for healing, but mosquito borne diseases lead to 1.5 million deaths a year worldwide. Her fear of leeches, in logical terms, was completely irrational.
It’s been calculated that the odds of being a victim of a terrorist attack is 1:9 million, whereas the chance of being struck by lightening is 1:3 million. Taking this logic from another angle, if we were really serious about keeping ourselves alive, we would spend more time watching what we eat than worrying about the next terrorist attack.
The french fries theory
Why do some fears live stronger in our minds than others? Levitt believes that fear best thrives in the present tense. "For a world that is increasingly impatient with long-term processes, fear is a potent short-term play. The likelihood of any given person being killed in a terrorist attack is infinitesimally smaller than the likelihood that the same person will clog up his arteries with fatty food and die of heart disease. But a terrorist attack happens now; death by heart disease is some distant, quiet catastrophe. Terrorist acts lie beyond our control; french fries do not”.
Another factor is the emotional weight attached to different forms of death. Death by terrorist attack or bird flu/sars is considered dreadful: whereas death by heart disease, for some reason, is not.
Sandman, a risk management expert that we have been in correspondence with, says that outrage and hazard levels do not carry equal weight. "When hazard is high and outrage is low, people under react, and when hazard is low and outrage is high, they overreact"
Into thin air
John Krakenauer’s account of the tragic attempt to ascend to the peak of Everest in 1996, ‘Into Thin Air’, showed that his team’s leader tried to stress the importance of a rational mindset by stating that on the day of the final ascent there was to be a pre-determined 2:00pm turnaround time, whether the summit had been reached or not. This was to give people the chance to get back down the mountain before nightfall. However other team leaders wanted to rely more on instinct (which was to be impaired by the high altitude).
A number of people died as a result of the decisions made on that day. The sheer drive to get to the top impaired their abilities to think clearly and rationally, and in their determination to reach the goal they lost sight of the real priorities. This tragic incident highlights how an overly optimistic expectation and a subjective assessment of the situation can lead to disaster. It reminds us how important it is to accurately assess the risk involved in any situation and manage it effectively.
Risk management for all occasions
Bernstein believes that the capacity to manage risk with the appetite to take risk and make forward looking choices are key elements of the energy that drives the economic system forward.
“Risk management weighs the consequences and probes the darkness in search of a light that converts the future from an enemy into an opportunity. The ability to define what might happen in the future and to choose among the alternatives lies at the heart of contemporary societies.”
Risk management helps us assess the dangers we face using a systematic approach to deal with the situation. We all gamble to a degree, but risk management attempts to take luck out of the equation and give us the power to make sensible decisions.
In Bernstein’s historical account of risk he says that rational people process information objectively: whatever errors they make in forecasting the future are random errors rather than the result of a stubborn bias toward either optimism or pessimism.
In order to make clear decisions we need to process information objectively, particularly in these uncertain and often emotional times.
Five characteristics a threat may have that appear to heighten fear in most of us, making the terrorist incident stay in both the forefront of our minds and the top of the news headlines are:
- Being beyond our personal control
- Potential for catastrophic events
- Unpredictability of risk
- Human as opposed to natural causes of danger. (Terrorism: Anxiety on a Global Scale DuPont)
Tirian's Interactive Collective Knowledge: feedback from our readers
- Hear ABC radio interview with Gaia Grant
- "It's a stranger world we live in but I enjoyed all the notes you sent...particularly when a mix of risk, controllability and moral outrage dictate our responses to tragedy; it makes simple common sense out of what appears to be complex reactions..." Greg Redon Jakarta
- More reading: Cross Myself and Hope to Fly
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