Risk Management Defined

Article by Traiden Global Solutions

Risk Management Defined

Risk Management, if done correctly, will increase the efficiency of operations.  Imagine if every employee was looking out for the welfare of the company, self-motivated to create a safe and secure work environment, capable of running operations as efficiently as possible during normal conditions and prepared to respond if something did go wrong.

A Risk Management Program is necessary to keep us in compliance.  More importantly, it will help us to stay in business.  A comprehensive program consists of the following:

• Business Continuity – The plan that keeps us in business during and after incidents and accidents, emergencies or disasters
• Emergency Management – Represent how we respond to those events
• Safety Programs – Protect our employees, vendors, visitors and guests from risk of injury or illness due to any part of our operations.  It also protects our assets and systems from unnecessary damages or loss. 
• Security Programs – Protect assets including personnel, operations, data, intellectual properties and physical boundaries.

Simply put; Emergency Management is what we do when our Safety and Security expectations fail.  Business Continuity is the plan that returns us to a sense of operational normalcy as quickly as possible.

Safety is Not the Absence of Danger…It’s the Presence of Preparedness

It Can Happen To You

 We were a strong company, great clients, trustworthy and competent employees, we were at the top of our game.  With offices in the US, Kuwait and Argentina, we managed a work force of highly skilled Risk Management Specialist.  850 companies, 40 countries on 6 continents, those were the numbers.  Up until April of 2005 business life was good.

A series of unfortunate events hit us back to back over a period of a few weeks.  It began with a medical emergency and continued to include theft, sabotage, missing money and two employees who started their own company using our clients and our systems.  All this time I was in the hospital trying to recover.  The result, we had to temporarily shut down operations and regroup.  During this rebuild is when I realized there was a much larger suite of events that could change the course of any business.  With that revelation we changed our mission, to rethink the scope of Risk Management Planning and program development.  We set out on this mission as Traiden Global Solutions – a Risk Management Partner.

We work on two principals:

1. If you don’t think it can happen…It’s about to
2. Safety is not the absence of danger…It’s the presence of preparedness.

Over 600,000 companies close every year, 40,000 close in bankruptcy court.  Some close due to a failed business plan, but countless others close because they failed to recognize all the Risks that businesses face every day.

Safety is Not the Absence of Danger…It’s the Presence of Preparedness

Plan to Stay in Business

 What we face in the modern business environment is much bigger than a simple slip and fall.  The probability and consequences of today’s threats and risk effect every type of business from the small office to the mega corporations.  It also takes much more than an OSHA Plan or an evacuation map on the wall to protect from the vast number of events that could shutdown business operations.  In fact, a lot of the risks we face can’t be fixed by just dialing 911.

 It’s not enough to just have a plan.  In fact, the plan is probably the last thing you’ll look for when a crisis begins.  If a company wants to Plan to Stay in Business, it’s going to take more than a simple document to ensure their future.  It takes a program.  With a program in place, you can rely on the strength of your team to make the right decisions at the right time.

Safety is Not the Absence of Danger…It’s the Presence of Preparedness

Measuring Risk

 After the incidents of September 11^th there was a 17% reduction in business related air travel and a 5% increase in distance equivalent travel by car.  There is a 65% increase in risk of being killed in an automobile accident than in a plane.  The results were an additional 2,302 people killed due to the after effects of 9/11.  Overtime, the air travel went back to its steady state and highway deaths declined.

The reason?  We seldom pay attention to probabilities and consequences when evaluating risk.   And, when we do give it proper consideration, our decision is often influenced by a collection of dreadful thoughts.  What Amanda Ripley, author of “The Unthinkable”, calls the dread factor.  (This book is a must read for everyone)

Risk = Probability x Consequence x Dread/Optimism

Dread = Uncontrollability + Unfamiliarity + Imaginability 

+ Suffering + Scale of Destruction + Unfairness

Following Hurricane Katrina in 2005, we were asked by a group of companies in the Silicon Valley area to develop a Disaster Center.  They felt someone should wake up every day concerned about the consequence of the most probable of events in the area, a massive earthquake.  The underlying concern for the safety and security of their businesses was, to them, overwhelming.  Therefore, it was much easier to hire some else to shoulder the burden of worry. 

The factors of their rationale included the following.  No one can control the timing or severity of an earthquake.  Unless you were in the Bay Area during the 1989 Loma Prieta Earthquake, you are unfamiliar with the resulting consequences.  It is hard to imagine anything but Hollywood’s version of the earth shaking, wreaking havoc or the level of suffering and scale of destruction.  Not to mention the unfairness of an earthquake in your own home state.  Simply put; it’s too much to process, so why bother.

The problem with the project was a lack of disasters.  What I call, distance from incident.  The further we move away from the impact of the last major disaster, the quicker we forget and the less the sense of dread or urgency.  The probability and consequences, although the same in magnitude, are replaced with the new day’s agenda.  Three years after the start of the Center the project was replaced with a proposal to plant trees.

This same risk equation can be applied to the disaster profile in any region of the world with the same results.

Safety is Not the Absence of Danger…It’s the Presence of Preparedness