Wis­dom from un­usual sources

Finweek English Edition - - Companies & Markets - MILPARK MAN­AGE­MENT MEMO

OVER THE YEARS I have ex­pe­ri­enced con­sid­er­able in­di­ges­tion when­ever I have heard that out-dated saw, “don’t risk a lot for a lit­tle,” of­fered once in an aca­demic text and re­peated ad nau­seam. Tak­ing risk is in­deed the spice of life, wit­ness those who climb, who sail sin­gle-handed around the world, even those who gam­ble. There­fore I found great plea­sure in find­ing two writ­ers who seem to agree with me, writ­ers whose words popped up most un­ex­pect­edly.

In­ter-Is­land News pa­per for the res­i­dents of Maine’s many is­lands. They are a hardy, in­de­pen­dent, and out­spo­ken lot. Re­cently the fed­eral gov­ern­ment pro­hib­ited the trans­porta­tion of propane on pas­sen­ger fer­ries. It hap­pens Maine’s is­lan­ders de­pend on their ferry ser­vice not only to get back and forth to the main­land but for sup­plies as well. Many res­i­dents de­pend on propane to heat their homes, cook their food and gen­er­ate their elec­tric­ity. Bar­ring propane from ferry ser­vice would in­crease costs dra­mat­i­cally. Cyn­thia Bourgeault of Swan’s Is­land ques­tioned the whole approach in “Risk: How much is too much?” She ar­gued that ”in re­cent decades Amer­i­can so­ci­ety’s safety-con­scious­ness has passed well be­yond the thresh­old of para­noia. It would al­most seem that in­sur­ance com­pa­nies now oc­cupy the role for­merly served by re­li­gion: to of­fer, in a frag­ile and un­cer­tain world, some guar­an­tee of safety.” While I would hardly give in­sur­ers so much credit, I agree with her anal­y­sis of our cur­rent com­pul­sion to cre­ate a risk-free so­ci­ety. She sug­gested that her is­land her­itage could of­fer an al­ter­na­tive: “is­land char­ac­ter: strength, pride, a tested trust in one’s own in­stincts, reliance on oth­ers, and hence a proper re­spect for one’s own con­tin­gency as a hu­man be­ing.” She

is a monthly con­cluded with some words of wis­dom: “To take stupid risk is . . . well, stupid. To take no risk is fa­tal. Where do we draw the line?”

Equally un­ex­pected was a sim­i­lar thought that I heard in Vi­enna in June, at the an­nual meet­ing of The Geneva As­so­ci­a­tion. The chief ex­ec­u­tive of the na­tion’s largest life in­surer, Pru­den­tial’s Robert Win­ter, stated clearly that “un­due aver­sion to risk can be the riski­est be­hav­ior of all.” His com­ment is ironic in light of re­cent dis­clo­sures about one of Pru­den­tial’s sub­sidiaries, but the thought is no less pro­found or im­por­tant.

To take stupid risk is . . . well, stupid. To take no

risk is fa­tal.

We are crea­tures of ex­ces­sive cau­tion much of the time. I am re­minded of mid­dle man­agers so fright­ened by the pos­si­bil­ity that an un­usual loss might oc­cur and “not be in­sured” that they end up wast­ing both their time and fi­nan­cial re­sources buy­ing what is in re­al­ity nonessen­tial in­sur­ance, and ac­tu­ally as­sur­ing their even­tual ob­so­les­cence.

The words of Bourgeault and Win­ter should be the new stan­dards for risk man­age­ment pro­fes­sion­als. Ref­er­ence: Mbuya, C. J. (2008). The A to Z of risk man­age­ment def­i­ni­tions, con­cepts and strate­gies. MP Pub­lish­ing, Pre­to­ria. Ar­ti­cle writ­ten by Dr John C Mbuya, Di­rec­tor: Man­age­ment and Lead­er­ship at Milpark Busi­ness School – www.milpark.co.za, 011 718-4000.

Dr John Mbuya

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