A honorable mention to Dr David Hillson, who I interviewed to learn more about risk management. He has given me various insights and new knowledge from his 35+ years of experience as a risk management consultant. Dr David has also wrote at least 16 books on the topic, which I highly recommend for those interested in learning more about risk management.

---

Life is full of uncertainties, that affects us in various ways. Some uncertainties do not mean much - like feeling undecided about what to eat for breakfast, while others are more impactful - such as achieving our objectives. These uncertainties that matters, are called risks.

Risk Management in a Nutshell

Risk management is about making decisions now, that changes the future. Think about the things that might or might not happen, and decide what can be done now to ensure that the things that we want to happen - presumably good things - happen, and avoid the bad things from happening. It is all about looking forwards into the future, understand what could go right or wrong, and work out a strategy on how to move from how we are now to where we want to be. It really is like time travel. Imagine the future, what things would look like, then return to the present and make decisions on how to move to a more favourable future.

In a nutshell, risk is defined as uncertainties that matters.

The Risk Management Process

Humans have done risk management for thousands of years (that is why we are not extinct), but the profession and techniques were formalised only during the 1980s. These techniques can be simplified into the risk management process - which consists of only 6 questions that are just intuitive, natural questions that everyone would be asking anyways.

In this article, you will be understand what are the 6 questions, along with an example to illustrate the process.

1- What are the objectives?

What would you like to achieve? Setting clear objectives is important since it allows you to measure the progress you will be making, since it serves as a benchmark for measuring the success of your actions.

2- What might affect the objective?

Think of all the things that might affect your objectives. Bring yourself to the future, and imagine the risks and opportunities that may be present. This process, called forecasting, is often aided by computer simulations and data analysis - which uses historical data and current trends to predict the future, however, unless for professional scenarios, your imagination is more than enough.

3- Which is the most important?

Now that you have identified several risks, filter them according to its importance and potential impact. Importance is subjective, hence you should assess your existing context, worldview, and values to determine which risks should be prioritised.

4- What should be done?

Think about the processes, changes, actions and decisions that you can take to mitigate the potential risks, and maximise the opportunities that you have identified earlier - create strategies.

Execute your strategies, and monitor the progress.

5- Did it work?

Once you have executed the strategy, you can reflect on the outcome. The world is constantly changing, and so should your strategy Monitor the progress and make adjustments if necessary, and repeat the process until your objectives are met.

6- What changed?

Reflect on what changed. Did you achieve your objectives? To what degree did your strategy work? Ask questions that assesses the effectiveness of your strategy, and risk identification.

An Example

Adam is a student who wants to be nominated as the school’s valedictorian for his graduating year. He is clever and exceptionally hardworking, but is often distracted with football practice and socialising with friends whilst playing video games. Additionally, he has a tendency to procrastinate, and is often late for school.

Let’s apply the risk management process to Adam’s situation.

He would like to be nominated as the school’s valedictorian. The factors that might affect his objectives are his tendency to procrastinate, and his tendency to be distracted with football practice and socialising with friends whilst playing video games. His largest risk is that he will not get nominated as the valedictorian. In an effort to mitigate this risk, he reduces his football practice, and limits spending time with friends and playing video games, to allow for more time to study and focus on extra-curricular activities. As a result, he improved his grades, win countless competitions and is set as an example to his peers. He later got nominated as the school’s valedictorian, and enrolls in a prestigious university.

Not All Risks are Bad

A common misconception about risks is that all risks are bad. Risks can be good or bad - the term given to the good risks is opportunities. Think about it, opportunities are uncertainties - its something that might happen, and if it happens, it will provide positive benefits to those who found and took advantage of it. Opportunities are risky, but with the right strategies and luck, you will be able to exploit it to your advantage.

Risk Management as a Life Skill

As shown in the example earlier, risk management is not just something those analysts and professionals do in order to maximise profits and returns to the shareholders, it is a skill that can be applied to any aspect of your life even as normal individuals. It is an important skill that can help you make better decisions by allowing you to assess the potential benefits and risks of your decisions.

I believe everyone should learn and apply risk management in their lives as it guides you to make better decisions, and ultimately helps you to live a better life - a life where you are in control.

The Future of Risk Management

The future of risk management is uncertain, but it is clear that it will continue to evolve and adapt to the changing needs of individuals and organisations. As technology advances, risk management will become more sophisticated and data-driven, allowing for more accurate and timely risk assessments.

At a personal level, risk management will become more integrated into our daily lives, helping us to make better decisions and navigate the challenges of the future with greater confidence. This is especially true as more of us become aware of the importance of risk management and the impact it can have on our lives, as a result of education, exposure, and awareness.

---

Thank you for the time, I hope you learned something new from the article that you can apply to your life. Stay tuned for next week’s article!

Dive Deeper

• A short article by Dr David on personal risk management
• The Risk Doctor YouTube channel - Dr David’s YouTube channel with over 200 videos, including shorts, full-length presentations, interviews & webinars on the topic of risk management.