Unconceivable Risks: Overlooking the Unimaginable

In the dynamic landscape of business, the adage "expect the unexpected" holds profound significance. Yet, many organisations fall into the trap of dismissing certain risks simply because they haven't previously encountered them or can't conceive their possibility. This oversight can stem from cultural norms, ego-driven leadership, lack of experience, or insufficient consultation, leading to vulnerabilities that could have been mitigated with proactive foresight.​

The Cultural Lens: How Organisational Culture Shapes Risk Perception

An organisation's culture profoundly influences its approach to risk management. A culture that prioritises risk awareness and open communication encourages employees at all levels to voice concerns and consider a broad spectrum of potential threats. Conversely, a culture that suppresses dissent or discourages questioning can lead to significant risks being overlooked. As noted by the Institute of Risk Management,

"Culture will have an impact on the management of risk." ​Risk Culture: Resources for Practitioners

Ego and Leadership: The Danger of Overconfidence

Leadership ego can be a significant barrier to effective risk assessment. When leaders believe they possess all the answers or view themselves as infallible, they may dismiss warnings or fail to seek input from others. This overconfidence can result in a narrow understanding of potential risks. As highlighted in a LinkedIn article written by Elona Lopari,

"Ego-driven leadership can have a profoundly negative impact on company culture, leading to decreased morale, stifled innovation, poor communication, loss of trust, and high turnover rates." ​Signs of Ego-Driven Leadership and Its Impact on Company Culture

The Experience Gap: Recognising the Limits of Past Knowledge

Relying solely on past experiences can create blind spots in risk management. Just because an event hasn't occurred within an organisation doesn't mean it's impossible. This mindset can lead to complacency, leaving the organisation unprepared for novel challenges. As emphasised by the Craig Stedman,

"Risk management is the process of identifying, assessing and controlling threats to an organization's capital, earnings and operations." ​What is risk management? Importance, benefits and guide

Dr Sean Brady, Brady Heywood, discusses ego during his podcast on the Royal Commission into the Quebec Bridge Collapse "Can ego knock a bridge down? How one man's decision caused the collapse of the Quebec Bridge".

The Consultation Deficit: The Value of Diverse Perspectives

Failing to consult a diverse range of stakeholders can result in an incomplete risk assessment. Employees on the front lines, external partners, and even customers can provide valuable insights into potential vulnerabilities that senior management might overlook. Inclusive consultation ensures a more comprehensive understanding of the risk landscape.​

The "What If?" Mindset: Embracing Curiosity in Risk Management

To effectively manage risks, business leaders must cultivate a mindset of curiosity and openness. Regularly asking "what if?" scenarios encourages proactive thinking and preparedness. This approach aligns with the precautionary principle, which advocates for caution in the face of uncertainty, ensuring that potential risks are considered even when they seem unlikely.

Learning from Others: The Importance of External Knowledge

The existence of legislation, codes of practice, international standards, and industry guidance often indicates that certain risks have materialised elsewhere. Acknowledging these external learnings is crucial in making the "unconceivable risks" conceivable.

Effective Controls Over Mere Belief

It's a common misconception to deem a risk "less likely" simply because it hasn't been experienced before or because there's a belief it won't happen. However, the true measure of likelihood should be based on the effectiveness of controls in place. Implementing robust risk management strategies and fostering a culture that encourages vigilance and proactive assessment are key to mitigating potential threats.​

Dr Sean Brady discusses this in his podcast, Brady Heywood Podcast, on The Pike River Mine Disaster. In the 3-part series he talks about the incident, the response and recovery and why it wasn't treated as a credible risk.

• The Pike River Mine Disaster - Part 1

• The Pike River Mine Disaster - Part 2

• The Pike River Mine Disaster - Part 3

You can also ready the Royal Commission on the Pike River Coal Mine Tragedy.

Conclusion: Making Unconceivable Risks Conceivable

In an ever-evolving business environment, the failure to conceive certain risks does not render them impossible. By addressing cultural barriers, mitigating ego-driven overconfidence, valuing diverse experiences, and fostering open consultation, organisations can broaden their risk awareness. Embracing a curious mindset, learning from external standards, and focusing on effective controls over mere beliefs are pivotal steps in ensuring comprehensive risk management. 

After all, acknowledging the possibility of a risk is the first step toward preventing it.