Risk Management


On October 13, the eyes of the world focused on a remote site in Chile where a group of miners finally began returning to the surface of the earth after 69 days of being confined underground due to a cave in.  It was a feel good moment that took our minds off the economy, negative campaigning, unemployment, and a host of other things to savor the moment.

A major part of the success of the operation goes to the careful assessment of various alternatives and the risks and rewards that were associated with each of the various options.  Even more important was the number and various disciplines the Chilean Government called on to assure a successful operation.    According to an article published in Business Insurance October 18, a wide variety of experts were called in to examine all aspects of the situation.  Experts from the insurance industry, NASA, the Chilean Submarine service, psychologists, nutritionists, engineers, and Doctors spent a considerable amount of time methodically reviewing the problem, and solutions.  The risk analysis continued on through the entire event and were not afraid to take the additional time to make sure the outcome was successful.

The article quotes Lane Bos, senior risk engineer and mining industry practice leader for Zurich  who indicated the planners “developed procedures and followed those procedures”.   The process was completed on the fly, but the key point here was they took the time to develop and then follow the procedures, continuously assessing the risk/reward for the action throughout the process.

Human beings are programed to react in certain ways when an event occurs that scares the heck out of us.  Our primal DNA coding pushes adrenaline, shuts down non essential body functions, and drives the mind to find a solution (have I experienced this type of a situation before?  What did I do and how did it work?  Please let me find the right solution before something bad happens!).  

I believe this is why we are so good a firefighting.  Fix it and store in the back of our minds in case we need it again quickly. 

In developing a risk management or business continuity/disaster recovery plan, you cannot plan for all types of emergencies.  In many cases you move from the 50 foot level to a 500 foot level for a base line and then provide alternatives for various scenarios (as an example evacuating the building as the base level, and different meeting points or exit strategies for fire, flood, gas leaks, tornado,etc.).   In developing the base line concept you also are adding to your experience and becoming familiar with the risk analysis process you develop the tools that help when the unexpected comes up. 

While the excellent article on the benefits of quality risk analysis is not currently available on Business Insurance, there is another excellent article on how Chile tapped NASA for assistance which is well worth the read and provides some insight into the thought process from an earlier time. 

An additional interesting PBS show from Nova chronicles the rescue and looks at some of the physical and psychological effects that helped these miners survive.  click here for further information and a preview of the show.

In the United States we take water for granted.    We turn the tap, open the valve, punch the button and water flows out to meet whatever the demand is.  Not only do we expect the water to come on demand, but we have high expectations for the quality of the water.   When the water doesn’t meet the stringent requirements demanded by government for public safety, the supplier is faced with a potential mountain of cost that runs the gambit of medical coverage for people getting sick, to clean up and production losses, litigation expense and damage to both the providers brand and the customers it provides.  If the provider is smart, they have build back up systems for the back up systems, developed contingency plans for natural and man made disasters and tested both the systems and plans to make sure that everything works according to plan.  Additionally these plans are periodically reviewed to make sure that there are no new systems, technology and/or threats that should be addressed.

Water providers will also look to see how the risks they face can be minimized or transferred as well.  The newest transfer method is through Water Resiliance Insurance offered by AON.   The program is geared to water utility companies and provides not only traditional contaminants insurance, but also forensic analyses, cleaning and flushing of the water system, transportation costs, employee overtime and for third party financial losses.  The first policy was written in for Anglian Water recently.

It’s good to remember that our usable water was not so protected.  In the 1800′s the  water used for the city was usually drawn from a source up river from the sewage treatment area, or the town itself to provide protection from the sewage that entered the water down river.  Unfortunately down river was another town that practiced the same process.    Unsafe and contaminated water was the norm, not the exception. 

In many areas, clean and safe drinking water is the exception.  Managing Business Risk is joining with other bloggers today through blogactionday.change.org  to promote the United Nations efforts to bring clean, safe water to millions of individuals where it is not currently available.  Please join me in supporting this worthwhile cause and sign the petition.

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I want to ask you one quick question. What business fears keep you up at night. What thought pops in your mind at 3:30 in the morning the turns a night of peaceful slumber into an hour of tossing and turning, puts your mind to racing at light speed and leaves you bleary eyed when the alarm goes off?

Today, October 13th, is National Face Your Fears Day, and it a perfect time to look at your fears and concerns about what can go wrong with your company.  I advocate taking 15 minutes to brainstorm your fears for the business.  Let your mind go, look at all the areas:   financial, competition, systems, supply chain, legislation, regulation, leadership, market saturation, productivity, economy,  quality, bad publicity, the list can go on and on. 

Follow the rules for brainstorming, don’t self edit, don’t justify putting it onto the list, don’t over-think it, don’t think the idea is just to crazy, or wouldn’t happen, JUST WRITE IT DOWN! 

Once the list is completed take a few minutes and look the list over, flesh out the thoughts that may be one or two words and describe the situation or a scenario or give an example that puts the fear into a context that is understandable.

In naming the fear and providing that concrete example you can begin addressing it.   People love to solve problems and by defining your fear you are defining a problem, something that can be addressed.

Turn this into a team exercise.  Gather your department, friends, peers, and others and host a “brainstorming break” to gather the business or company fears of others.  You will be surprised at the information that comes out, and you might be able to help someone in another department remove a fear because of information you know.

Remember the words of Franklin D. Roosevelt in his first inaugural address  “So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” 

So, take the first step, write down your fears, define them, it is the first steps into identifying risks within your organization.

I would love to hear what fears you have come up with.  Please leave a comment, or send an e-mail to me sharing your thoughts and fears.

Incidentally, tomorrow is Blog Action Day, a day where the blogging community comes together to speak on a specific topic and raises awareness of the issue.  Managing Business Risk is very proud to be part of this community.  Check back tomorrow for our posting and if you are interested in participating in the group of more than 3600 bloggers from 125 countries around the world, click here.

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