Tag Archives: risk

When You Allow It

Leave a reply

“David,” she said, “you are one of the most capable people in this program. Your work is genuinely good. Your analysis is rigorous when you allow it to be.” She paused. “You don’t allow it to be, often enough, because allowing it means staking a position that someone might disagree with. And you learned, this program taught you, very effectively, that the risk of being wrong in public is greater than the cost of being right in private. So, you seek consensus. You look for permission. You ask people like me what you should do so that when it goes wrong you can escape accountability.”

Premeditated Culture, now available on Amazon.

What to Mitigate, What to Prevent?

1 Reply

Four ways to look at risk.

  • Risk with low probability and minimal damage
  • Risk with high probability and minimal damage
  • Risk with low probability and catastrophic damage
  • Risk with high probability and catastrophic damage

Risk with low probability and minimal damage can be self-insured, meaning I am willing to accept the risk and endure the consequences.

Risk with high probability and minimal damage will depend on my threshold and tolerance for pain. Even a splinter in a finger can be annoying.

Risk with low probability and catastrophic damage creates mitigation behavior. I may be willing to accept the risk, but in the event the risk occurs, I want to mitigate the damage. I may seek outside protection, an insurance product. Insurance rates depend on low probability to calculate the premium.

Risk with high probability and catastrophic damage creates prevention behavior. To protect my best prevention behavior that inevitably fails, I may seek outside protection, an insurance policy. Insurance rates consider the high probability to calculate the premium and often, actively participate in the prevention behavior.

What risks come with your business model? How do you manage that risk?