The importance of risk identification
Today, someone asked me what the importance of risk identification was, and I thought it might be interesting to share my view on this matter.
In fact, everyone identifies risks many times every day in order to get a maximum value out of it. We are constantly on the lookout for opportunities or threats, to be able to get and keep what we want.
It is why people look left and right before crossing a street. It is why business people go to events. It is why students study before taking an exam. It is why people gather to discuss the possible consequences of climate change and think about the solutions.
We do this because we relentlessly pursue, avoid, retain, ... and manage risk. We even do this unconsciously, by the thousands of choices and decisions we make every day.
Because risk is the effect of uncertainty on objectives.
This effect results from any kind and number of risk sources that can have a positive or a negative effect on your objectives, or even both positive and negative simultaneously.
An objective is something of value to the person or entity having the objective. Objectives can be at an individual, team, organisational or even at a societal level.
Objectives can be deliberate and conscious (for instance being successful in business) or automatic and at an unconscious level (for instance your breathing or the beating of your heart)
Identifying risks is about becoming aware of how specific risk sources can have an effect on one’s objectives in the (uncertain) future.
When one becomes aware of the risk sources that can have a positive effect on one’s objectives, one can manage these risk sources to get a maximum effect and therefore increase value.
Also, when becoming aware of possible negative effects on these objectives, one can likewise manage these risk sources to get a minimum effect on these goals and therefore protect value.
Without identifying risks in one or another way, it is impossible to manage risk to optimize value.
As such, risk identification is essential to manage ones objectives (all of them!)