So what was it that made me change my plans? I’ll put it down to experience and being prepared to change plans if the environment required it. Even though I was only 19, I’d already spent 18 months backpacking in remote and wonderful locations so I had a good sense of what was ‘normal’ in that part of the world. Quite simply, I’d walked in completely fixated on using the facilities and had ignored the three men already in there. Now three men in the gents isn’t exactly abnormal, but my instincts had picked up that something was wrong well before I’d even noticed anyone or anything. Fortunately I listened to them and despite being standing squarely in front of the urinals, I turned around and walked straight back out without so much as unzipping my fly.
The odd part of the equation was my behavior but what had prompted it? Well, one of the men was lingering at the doorway keeping a lookout (which was obvious in hindsight), another bent over at the hand basins but not washing his hands and a third chap was of the urinals but not urinating. To this day I don’t know for sure but I’m convinced that the moment I was in full flow, I would have had two guys behind me, possibly with a knife, lifting my wallet while the third kept a lookout to make sure no-one was coming. A perfect setup for a robbery with little that I could have done to prevent it. Some of the things that convinced me of this were: the look of surprise and disappointment on their faces, the fact that the two in the toilets moved towards me as if to cut me off as I walked out (I was too quick fortunately) and the fact that none of them walked out in the few minutes I spent watching from outside. In retrospect, I should have told a police officer in order to prevent another person being robbed, but frankly at the time, it didn’t seem like I would get much response if I told them that there were three men standing in a toilet. In any case, it wasn’t a normal response to their carefully prepared plan and I walked out with a straining bladder but with my cash and dignity intact.
The point of this story is twofold:
1. Firstly that I changed plan in response to a changing environments
2. Secondly that my response was unexpected – particularly to the other three (although also to myself).
The story illustrates two of the issues at the heart of risk management. All risks are complex, multi-dimensional and changeable, but too often we stick to our carefully determined plans with a “full speed ahead and damn the torpedoes” mindset. Indeed, in the business world, changing plans is often seen as a sign of weakness or vacillation. Sometimes it is, sometimes it isn’t. The trick is to honestly be open to new information or circumstances, and being prepared to act on it.
This applies to any type of risk, whether man-made or natural, financial or physical. Equally though, we need to consider the other side of the coin. What happens when our adversary or business counterparty change their plans. Will we be as unable to adapt as my three adversaries at the bus station were? It’s the unexpected that changes the risk dynamic, and even the experts often get it wrong in this regard. When the Noble prize winning economists behind Long Term Capital Management thought they had derivatives risk fully calculated, they took on ever-larger trading positions, but even they couldn’t factor in all their counter-party risks. When Russia devalued the rouble in 1998 and declared a moratorium on 281 billion roubles ($13.5 billion) of Treasury debt, the LTCM exposures created an international financial crisis. In the end the Federal Reserve Bank of New York had to organize a bailout of $3.625 billion by the major creditors to avoid a wider collapse in the financial markets.
In a similar vein, we might put serious countermeasures in place to prevent a terrorist attack, but how do you factor in, just how the terrorists will change their plans based on your changed defenses. Equally, do we adequately consider human factors to changes in natural disasters? If for example, we build a public hurricane shelter in a small town, could that mean a higher death toll because nobody leaves town when a hurricane alert is declared? Risk is a complex equation with no simple answers.
So just how do you address those nebulous risks?
There is no single way to address every equation around nebulous risks. You’ll have to figure out each situation for yourself but here are the three best ways that I know of to address such risks:
Investing in training for managers at all level (including risk managers) is the most effective way I know to address those volatile and little understood risks which can only be described as ambiguous or nebulous. One simple example: When I was managing security for the Australian Trade Commission, one of our big risks was travel safety. ‘Travel safety’ is a nice catch-all term for everything from bad food to terrorist attacks and about a million other issues in between. As most similar organizations do, we used government travel advisories along with in-house analysis and information from a range of sources to provide travel safety briefings to our people. This by itself is a good thing but when you factor in the different issues not only between countries but also within regions, cities and even suburbs in any given country, a ‘one-size fits all’ travel advisory is manifestly inadequate. Our biggest challenge however wasn’t the country risk but working out the capabilities and experience of our staff. On one extreme we had ex-military personnel with a pile of used passports who we could have dropped into Iraq without hesitation, while at the other extreme we had people who’d never left their home country.
The widely different levels of experience meant that no two people ever really faced the same risks. The sort of scams, robberies or even food poisoning problems that would have been the end of a trip for some of our people were virtually irrelevant for others. Assessing peoples experience levels was something that our team did as a routine practice, but it was time consuming and relied on their intuition, so we couldn’t really call it systematic. One of the things that I’m most proud of from my time at Austrade was leading the exceptional team that built the travel safety training program. The purpose of that 3-day program was to provide a base level of awareness, ability and skills that any individual could apply without having a security advisor standing beside them. And equally importantly, we needed to deliver those skills consistently and systematically to all staff who travelled. With a team of highly experienced individuals, we did indeed develop a training program, which continues to be critically acclaimed by attendees and their managers.
We couldn’t manage every risk by remote control and we couldn’t prepare people for risks that we couldn’t anticipate but what we did manage was to prepare them by giving people a level of proficiency sufficient to manage most risks themselves.