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Fight, Flee or Diplomacy - some things you just know!

In life, risk management requires us to weigh the costs of our decisions. Follow the posted speed limit? Jump a red light? Build more and bigger ships in an already saturated market? Do we give up when the going gets tough? Do we rely on the facts or on fact resistant press releases...

Risk management has kept our species alive. We see patterns and quickly deduce, rightly or wrongly, friend or foe, fight or flee. We even see patterns where none exist. We routinely consider factors that aren't relevant and ignore those that are. It is just how our brains work. We let emotion influence the importance of the variables. Find a pattern and keep life simple. As seen in container shipping circles bigger must be better (or was) so let's all build even bigger container ships just as the global economies go into a slow cycle...

In most organizations there may come a time when an impasse is reached. A place where the distance between what is and isn't appears Grand Canyonesque. No slick fast talking last century marketing campaign of recycled shtick is going to make the pig fly or bridge the distrust chasm that has carelessly been allowed to develop.

How does one tell "the-buck-stops-here-Boss" that the "it" just isn't realistic. Isn't realistic based on the available science, planning, timing, funding, political climate?

If the Boss is known for shooting the messenger probably not a whole lot of "truth to power tellers" will be found. Instead we get a replay of the Emperor's New Clothes, same story different century.

Recently I was told a tale of a modern transit system's construction. An ambitious time line was set for completion, testing and launch. A torrent of press releases were drafted and issued. Using critical path management the building team was able to identify early that the completion date in the press releases was aspirational at best.

The CEO, a hard charging get things done kind of guy, had staked his reputation on the "on time on line" press release date. Even after receiving the news of imminent delay he guaranteed that the project would be ready for the original date and the inaugural Ride of the VIPs.

The team was told to add shifts. They did. The team was told to hire new consultants. They hired the best. The team worked around the clock, more workers, more trucks, more managers. Alas facts are stubborn things and the team was soon mired in a time warp trap made worse by the inexorable tide of press releases.

The team finally approached a trusted friend of the CEO with their analysis. The facts were presented, questions answered quickly, efficiently and technically. The room was quiet, the clock ticked, minutes seemed like hours. The trusted friend then asked the single most liberating question "what can you have done by the date?"

With that one question the scope of the challenge changed. The stubborn facts were no longer restrictions they were tools to create. The question tapped into the ingenuity as necessity is the mother of innovation and invention. Once outside the original parameters the team employed a risk management approach to the challenge and came up with a brilliant plan.

More on the plan in a second.

How many times have we been in a similar place? A seemingly either or situation, technical or baccalaureate, lead or follow, right or wrong, friend or foe, stay or leave... Life is too short to limit our choices. This is where risk management is at its best.

Risk-based decision making involves a series of basic steps. It adds value to almost any situation, especially when the possibility exists for serious or catastrophic outcomes. The steps can be used at different levels of detail and with varying degrees of formality. The basic, most important question remains: if you were the decision maker what would you want to know?

The key to the success of the process is in completing each step of the fact finding process in the simplest, most practical way possible. Some complex situations may call for more detailed risk assessments - nuclear power, clean coal, LNG transfers, leaving the EU...

Most situations can be addressed with a simple risk assessment process that organizes known information into possibilities - see the post Brexit press and for a listing of unwanted outcomes.

The data regarding the possibility of unwanted outcomes separates risk-based decision making from the more traditional (instinctive/emotional) decision making. The consideration and calculation of possible losses for any set of stakeholders, consumers, suppliers, the environment, manufacturers, ports, schools is unique to risk-based decision making.

Losses can include such things as harmful effects on safety and health, devaluation of currency, loss of jobs, degraded natural environment, property loss, and mission success.

The risks for an engineered system or activity are determined by the types of possible losses, the frequency at which they are expected to occur, and the effects they might have. Although not certain, possible losses present real risks that must be considered in most decision-making processes.

Risk include decision delay, cost, schedule requirements, trust, credibility and public perception. In risk-based decision making, all of the known identifiable factors that affect a decision must be considered. The factors may have different levels of importance in the final decision and may even change with the maturing of the project.

Senior management and the stakeholder's Trust is maintained in the process through an orderly transparent decision analysis structure that provides information quickly, clearly and in a factual unbiased context. Providing the stakeholders and decision makers the information needed to make smart choices.

The Brilliant Plan

The art of the possible was employed with a formal risk matrix. Routes and stops were prioritized. The final plan was brilliant in its simplicity. Recognizing that the VIP's would want the fastest most visible inaugural ride with easy access for their arrivals and departures the team focused on the completion of only the single most attractive route.

Establishing the route provided a focus. Resources were shifted to the main line with each line's division taking part in the renewed effort. The Ride of the VIPS went off on time with the commiserate flood of congratulatory press releases.

A formal system of risk management was used to prioritize the remaining new build effort. The train remains an example of a model 21st century people moving transportation rail line.

Would a formal risk management approach have changed the Brexit vote?

Dan Ariely has eloquently postulated we are a predictably irrational species. We tend to follow the story that appeals most to our emotions. Afterwards we rationalize our decisions with deft slight of memory and cherry picked facts.

Be careful what you wish for.


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