Calculated risk.

Risk is inherent in everything we do so our aim as an individual or an organization is not to avoid risk but rather to take calculated risks. What do we mean by calculated? In simple terms calculated in this context means making an informed decision and when it comes to making informed decisions on risk there are two critical factors we need to consider, the first is likelihood and the second is consequences. 

The term, likelihood refers to the chance of something happening and can be expressed in either quantitative or qualitative terms depending on the circumstances. A term you might hear used interchangeably with likelihood is probability. Understanding the relative likelihood or probability of a risk is one way to determine its significance, then if warranted we can employ controls aimed at reducing its frequency or chance of occurrence. 

The second term, consequences, refers to the result, effect or impact arising from a risk event. As with likelihood, understanding the consequences of a particular risk is a valuable insight that informs our priorities and these two factors combined allow us to identify our most pressing issues from a risk perspective and manage them proactively. 

Another concept that is fundamental to making informed or calculated decisions on risk is vulnerability, which in this context refers to specific factors or variables that may increase or amplify the likelihood or consequences of a risk event. 

These factors include; attractiveness of the target; accessibility to the target, our overall exposure and lastly, personal risk factors. Let’s take a look at each of these in more detail.

Firstly, attractiveness refers to the symbolic value of a target, for example the 9/11 hijackers chose the World Trade Center and the Pentagon as targets because they were iconic symbols of American power. They knew that striking high profile targets like these would have a profound impact. In a criminal context this factor, attractiveness might refer to the value of a potential target.

The second factor, accessibility refers to the ease with which a threat actor can access a target. Iconic or high profile targets are often well protected and therefore referred to as “hard targets” while an unprotected or easily accessible target is considered to be more vulnerable to certain types of threats. 

Next, exposure refers to the frequency or duration you are exposed, or your proximity to a particular threat or hazard. For example, if travel along a particular route is known to be dangerous then a group who needs to make this trip on a daily basis is considerably more exposed than a group who only needs to travel this route on a monthly basis. To give an example of a hazard based scenario, if I am a front line medical worker, my risk of being exposed to Covid 19 is considerably higher than a self-employed person working from home due to my proximity to potentially infected patients.

Finally, personal risk factors refers to the impact personal factors including; your age, health, gender, knowledge and special skills have on your individual risk profile. We have explored personal risk factors in a previous blog post, however to demonstrate how these factors can influence vulnerability let’s consider the following. 

It has been well publicized that older people, those with pre-existing health conditions such as diabetes, respiratory problems or obesity are more likely to be seriously impacted by Covid 19, meaning that these personal factors increase your vulnerability to the virus. From a threat perspective, a person who is of white Anglo-American origin and only speaks English will be much more vulnerable to threats during a business trip to Mexico City than a Hispanic person with Spanish language skills. These are just two simple examples of how personal factors can influence our vulnerability to risk.

So our ability to make informed or calculated decisions on risk is contingent on possessing a basic understanding of likelihood, consequences and vulnerability.

Stay safe.