Risk management or self-deception? (1)

Why this article?

Now, for a change, a topic in which satirical exaggeration is not so easy for me.

What might be the reason? Maybe the topic is simply too close to my heart, too important to me. Also, I have not yet completely penetrated it myself, thought it through to the end, internalized it. At least that’s what my gut tells me.

I already question the title again. Shouldn’t it actually be “I” instead of “you” (or at least “we”)? But it’s OK. After all, I already have a certain advantage, because I have already dealt with it. That’s enough of doubt. What is it about? It’s about risk management.

There are lots of standards and even more literature on it. To get things clear right away: in principle, what they say is not wrong.

Ok. With exceptions. Some of them are already more on the level of the 80’s  – the 1880’s.

For example, the work by an author from Central Switzerland who, apart from the fact he wrote in 1880, also calls for risk management to be suppressed in favour of success management. This will never ascend to the most important insight into risk management in projects. Rightly so.

This includes the books of Tom DeMarco, whom I certainly hold in high regard. Several of his books are right behind me in the bookcase. But dust has collected on them. “Waltzing with Bears” was published in 2003 and was thus written before a time that made us humbler in terms of risk management (at least the practitioners, see also author from Central Switzerland).

I once had the opportunity to see Tom personally at a conference. When asked by the audience which disciplines of project management he considered to be the most important, he answered after a short reflection: stakeholder and risk management, as these would most likely address the handling of imponderables. In my opinion, NLP practitioners like to use the term “interesting” when they can’t get much out of a statement. I also thought “interesting”.

It took a while before I realized that Tom was using this term to name what he saw as the central purpose of project management: dealing with imponderables.

Traditional risk management

Classical risk management distinguishes between “known unknowns”, the project risks accessible to us, and “unknown unknowns”, i.e. experience has shown that they are rather “bad surprises”. For dealing with “known unknowns” standard literature offers us proven and familiar procedures. But what about the “unknown unknown”? The generally postulated approach is “monetary reserves based on organizational or industry-specific experiences,” also known as the “management reserve.”

The Black Swan

But what events in our world (and in projects) are really devastating? Events that are predictable and caused manageable damage? The opposite is the case: So-called “black swans” like 9/11, the banking crisis and Fukushima have profoundly changed our world to this day, often by (mostly) men, trained at highly praised elite universities, previously assessed as “impossible” or not even suspected (also applies to individuals from Central Switzerland).

In his book of the same name, Nassim Nicholas Taleb demonstrates the devastating effect of such events and explains why we are so susceptible to them: through the unreflected way in which we infer the future from the past.

His wonderful example for clarification is the story of the turkey. The turkey is kept and fed from birth by the farmer. Every day anew. The turkey grows and thrives, is protected from disease and that every day ….. until Thanksgiving. We can assume that the turkey was somewhat unprepared and did not consider the consequences of the event (are there actually turkeys in Central Switzerland?).

Such “black swans” lead our thinking up the garden path: because they can be explained afterwards, they give us the impression that we “somehow” anticipated them (as D. Kahnemann’s investigations prove).

(What I could have foreseen is that our respected editor finds the text too long and asks me to make two parts of it. End Part 1.)

Comment from the editor: That’s right! Part 2 will be ready for you next Friday!

Original text: RGE
English translation: BCO


  • handle with care (1): RGE

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