Risk Management: A Multilayered Construct

Risk is an inherent part of life, intertwined within almost every decision we make and every action we take. At its core, risk represents the possibility of loss or harm. It is a concept that transcends all disciplines from finance, investment, purchasing and governance. Their considerations are all pervasive within everyday life decisions, shaping human and organisational behaviour; societal and economic development.

In the financial and corporate realm, risk is a central concept. Investors and financial analysts frequently evaluate risk to determine the potential for financial gain or loss. Risk in finance often refers to the variability of returns on an investment. For instance, shares generally exhibit higher volatility compared to bonds, implying that while they offer the potential for greater returns, they also carry a higher risk of loss. This trade-off between risk and reward is foundational to investing strategies, where individuals and institutions seek to balance potential gains with acceptable levels of risk.

Moreover, risk is an important factor in policy-making and governance. Governments assess risks to create regulations and manage resources for the public good. For instance, disaster management policies are designed to mitigate the risks associated with national security or natural calamities. In this context, risk assessment helps in allocating resources efficiently and building community resilience.

The notion that "risk is too important to be left to experts" underscores the necessity of broader engagement in risk assessment and management. While risk experts bring specialised knowledge on the application of a framework to consider risk, only the specific domains understand the likelihood and consequence.

Domain experts within an organisation or government must become the risk owners, the C-suite in corporates or the SES in Government.  Their ownership responsibilities can not be outsourced to risk manager or consultants, they need to be involved with those who mitigate those risks on a daily basis. Technology is now here to make this a reality.

In conclusion, risk is a complex and multifaceted concept that permeates various aspects of life. Whether in finance, investment, purchasing or policy-making, understanding and managing risk is crucial for achieving desired outcomes and navigating uncertainty.

By owning risk and managing the activities to mitigate risk, individuals and institutions can make informed choices to implement effective strategies and activities to avoid, mitigate or enhance their ability to cope with and capitalise on the unpredictable nature of life.