Less is more in risk management too

Complexity, interdependencies, black swans are all widely used terms among risk managers . Unfortunately some risk manager still use them to hide behind, while working ultimately with their gut feelings. However, all this can be solved with a properly defined glossary and a proper methodology should bring clarity and focus, as indeed, less is more in risk management too.

FMEA or any another tool you use should simplify your task, ERM development, and not overwhelm you with pages and pages of fuzzy “results”. You need a clear road map to beneficial actions and not a phone book of records.

When you search in Google you don’t care that the search found 49,000,000 results (Google search for “risk management”). What you are interested in are those links that actually give you some actionable information, oftentimes drowned deep into those pages, reachable through further searches. Similarly as risk advisers we tell our clients or students (course link) that in their practice a good RM approach should be quick and bring answer immediately.

Risk management tools should be more like searchable Google and less like old Roman record keeping. The risk register needs to be drillable to fit your needs, without overwhelming you.

Less is more in risk management too

Depending on your need of the day, say for example the:

• renewal of your liability insurance,
• calibration of insurance and possibly a captive insurance,
• training of personnel,
• etc..

your ERM risk register should be able to provide you the answers without any alterations. This is where multicolored risk matrices die.

Knowing that you have 500 yellow risks is useless!

On the other hand, knowing the top 3 intolerable risks and having a clear roadmap to mitigative investment is fundamental for resilience building and long term sustainability.

The end of Excel

Well, maybe not completely.

In some cases where the system can be simplified, the failure criteria is mono-dimensional (for example only looking at physical loss or reputational damages or H&S etc..), the inter-dependencies are not too complex then Excel can still work.

However in general we have:

• complex inter-dependencies,
• systems with many elements (could be, for example, conveyor belt, rail track, tailings dams etc..),
• with many different hazards (families of hazards such as fire, chemical spill, electrical blackout, pandemic, cyber attack etc.).
• So, generally, the number of registers will grow past Excel computing, sorting and displaying capabilities.

In the great majority of cases we deal with need business intelligence tools to be able to drill the data from a robust, well structured risk register and sort out what we are looking for without being overwhelmed, indeed Less is more in risk management too.

Tagged with: calibration of insurance, captive insurance, ERM, interdependencies, liability insurance, mitigative, roadmap

Category: Risk analysis, Risk management