Risk, and What Is and Isn’t Under Our Control
One of the core tenants of the ancient philosophy of Stoicism was that some things are under your control, and other things are not under your control. Epictetus, a slave who later opened up a philosophy school, wrote on this topic:
“Some things are in our control and others not. Things in our control are opinion, pursuit, desire, aversion, and, in a word, whatever are our own actions. Things not in our control are body, property, reputation, command, and, in one word, whatever are not our own actions.” (1)
This idea, which later became known as the “dichotomy of control”, states that the only things within our control are our own actions. Everything exterior is outside of our control. So when something bad happens to us, what is really important is how we react.
I think that this concept has some interesting parallels to risk management.
It basically assumes that bad things are going to happen, whether you like it or not. This is basically axiomatic in the field of risk analysis – we wouldn’t need to assess and manage risks if bad things never happened. Our businesses face all kinds of risks related to the financial, operational, technological, and strategic aspects of the company. Sometimes things happen that are just outside of our control.
On the other hand, the things that are within our control, our actions, can help to prevent risks from happening, and mitigate the impact if they do occur. In other words, you can make your business less vulnerable to loss through good planning before something bad happens, and effective responses afterwards.
For instance, many R&D projects fail. To some extent, it is outside of our control. However, certain things are in our control that can reduce the probability of failure, such as leveraging good project management practices, and selecting projects that appear to have a high likelihood of success. If a project does fail, the impact can be minimized by having a strong portfolio of other projects in the pipeline that can offset the loss.
Or say there is a storm with strong winds and a heavy tree limb falls on your building. Obviously you cannot control the weather, but maybe something that is within your control is to have the trees close to your building trimmed periodically. Having insurance that can mitigate the losses from such an event is also something in your control.
You cannot always stop bad things from happening. The world is a risky place, and there are a lot of things that are outside of our control. But that doesn’t mean we are helpless. There are many things within our control that can be done to minimize risk, whether it involves reducing the likelihood of some bad thing happening, or minimizing the impact if and when it occurs.
Realizing what is and is not in our control can help us to effectively manage risks.
At Collier Research Systems (www.collierresearchsystems.com), we can help clients think about risks - what can go wrong, how likely it is, and what are the consequences, as well as guide decision making related to effective risk management actions.