One of my favourite books about risk management is Predictable Surprises – The Disasters You Should Have Seen Coming by Max. H. Bazerman and Michael D. Watkins. This is not an explicit risk management book but is about identifying, assessing and managing your risks and a must read for risk managers.
The authors describe the six shared traits of predictable surprises, which can be found in the events of September 11, 2001 and scandals like Enron.
- The leaders knew the problem existed – Three Presidential administrations were aware of the growing threats of terrorism (i.e., they identified the risk) but their likelihood was inaccurately assessed.
- There is a failure of response and not a failure of recognition – Even though people know that a problem will not solve itself, and is getting worse with every day, people still don’t try to solve it and so there is inaction.
- The future is discounted – If we fix the problem today, we incur significant costs today, while “preventing an ambiguous and merely potential harm” in the future. (An ounce of prevention is worth a pound of cure.)
- There is no measurable benefit avoiding a predictable surprise – Imagine the politician who has to convince the public that spending money now could prevent a disaster later. Maybe.
- We like the status quo – It is a natural human tendency to keep things the way they are rather than change; because there is no crisis so let’s keep doing what we always do.
- The lobbyists – There is always a small vocal minority which benefits from inaction and is motivated to “subvert the actions of leaders for their own benefit.” Think about an airline industry trying to meet the Street’s quarterly exceptions instead of investing in the safely of passengers.
I think reading a book like this makes us better enterprise risk managers so check it out.
For a list of other books Riskczar Recommends, please follow this link to Amazon.com.