Working with risks
What do we usually imagine when we hear the word “risks”? I immediately remember the phrase, “those, who do not take risks, do not drink champagne.” There are several versions of the origin of this proverb. The first one is about champagne. Bottles stored in the cellar could explode and injure people with glass pieces. Every time people went down to the cellar, they took risks, but then they started wearing protective suits. The second one is about racers. In 1950, the sponsors presented a three-liter bottle of champagne to the winner of the Formula 1 World Grand Prix of France, Juan Manuel Fangio.
Since then, the organizers of the races decided to preserve this tradition and began to give champagne to the winners. In the first version, people could get hurt, and in the second, even die. Despite this, a beautiful quote has put an unconscious attitude to risks into our mentality. Moreover, it settled an encouraging attitude towards them. If we add to this the unwillingness of people to take responsibility for their actions and wait for someone to decide everything for them, then we get a rattling mixture.
People either unknowingly take risks and incur losses, or they are not ready for risks at all and cannot start anything new because of fear. Yes, those who do not take risks do not drink champagne, as they lose one of the options to get what they want. And they also do not lose all the money, family, apartment, health and other things that can be taken away by serious risks. There is no need to listen to those who took a chance at random, they were lucky, and now they teach to do the same in online courses. Let’s listen to those who can argue why they took the risk, how they were going to work it out, or tell others how to avoid it. In life, a decision can be made to “take a risk”, but you need to prepare for it if you have time. There should be a process of planning risks and tasks that will help mitigate these risks.
“I accept the fact that every time I get into my car, there is a 20% chance I could die. I can put up with it, but not one percent more”
Niki Lauda
Niki Lauda is an Austrian racing driver, three — time world champion in the Formula 1 class. He says the quote above in the movie “Race” when he asks to cancel the race in the 1976 Japanese Grand Prix due to a wet track. The race was not canceled, as the broadcast rights had already been sold. After the first lap, Lauda refused to continue the race due to almost zero visibility. That is, he accepted the risk of death with a probability of 20%, but as soon as it began to increase, he avoided it. With this example, I want to show that risk is not an audacious way to achieve success. Risk is an uncertain event or condition that, if it occurs, has a negative or positive impact on you, your goals and resources. The formula for the meaning of risk:
As a result of the <cause>, a <result> may occur, which will lead to certain <consequences>
It can be seen from the formula that there are several parameters in it. By working with them, we can influence the risks. What can be done about the risks?
1. Avoid risk (avoid or circumvent);
2. Transfer the risk (to insure or redirect);
3. Reduce (reduce the probability of occurrence or magnitude of consequences);
4. Use it for your own purposes (yes, there are positive risks too);
5. Take the risk (prepare for losses and survive).
Before working with risks, you need to identify them. It’s not easy, because you need to find risks and determine their probability in uncertainty. In addition, it is necessary to overcome the fear of risks, turn on critical thinking and be honest with yourself.
To simplify it, you need to sit down and simulate all possible scenarios for the development of events. Then assume what might go wrong and place it on a scale from the worst option to the best.
You can sit down alone, think and generate risks based on your experience and assumptions. You can have a brainstorm with loved ones or those who have had a similar experience. In ambitious goals, you will only have to gain experience, so it is unlikely that you will be able to fix all the risks. When I look at the test tasks of candidates for the position of project manager, I immediately look at the risk block. They show right away what kind of experience a person has. The less experience, the more superficial the risks.
Therefore, a look from the side or from another angle will not be superfluous here for the first time. By default, we mean that people from your positive environment will help you, but not toxic whiners who will inflate anxiety and dissuade. No need to limit yourself, do not be afraid to fantasize and generate any risks. A large list of risks does not mean that they will all happen. Moreover, not all of them are fatal. The degree of risk is determined not by the size of your fear, but by the product of “consequences” by “probability”. You need to turn off emotions and rely only on facts and figures. To determine the degree of risks, I recommend using the risk matrix, which is used in project activities. It helps to visualize and prioritize risks.
The risk matrix consists of two axes. Vertical — “degree of damage”, and horizontal — “probability of occurrence”. The degree of damage can be low, medium, high, very high and critical. The probability of occurrence is measured as a percentage:
● 0–20% — the probability tends to zero, it is almost impossible;
● 21–40% — unlikely, most likely will not happen;
● 41–60% — perhaps you need to take a closer look;
● 61- 80% — likely, most likely to happen;
● 81–100% — very likely, almost a guarantee.
All risks are located in three zones:
1. Green zone — risks for which no special actions are required;
2. Yellow zone — everything is under control, but we need to prepare for possible actions in case the risks start to creep into the red zone;
3. Red zone — unacceptable risks, it is necessary to act or avoid risks in this zone.
Those who take risks and drink champagne say that there is no need to be afraid of red risks. I adhere to the position that, if possible, they should be avoided or transferred to the yellow zone. Risk management is a constant process of transferring risks from red to yellow, and from yellow to green. Life is not a rehearsal and not a series of “Matryoshka’s Life”. Why put yourself through trials and stress to get out of them? It is better to spend energy on development. I’m not against risks, but they should be moderate. You don’t need to put everything on the line, you need to systematically move towards the goal.
You may have to take a risk for some results, but when you see a critical risk, always ask yourself the question: will I survive the most negative scenario? If the most negative scenario completely nullifies you, deprives you of all money, health or family, then you should not take this risk. If the damage is not critical, and you only have to get out of your comfort zone for a while, then you can take the risk. Of course, you have to present a plan for how you can make up for this damage. It’s one thing to lose your health or your family when you could have avoided it. Another thing is to eat instant noodles for a couple of months until you find a new job. Always evaluate how the consequences of risk can change your current situation, and how quickly you can recover it.
When I moved to Moscow, I didn’t plan the risks. I just generated all the barriers and problems that might be on the way, but the incentives to leave quickly destroyed. The scariest thing was to cross the border. There has already been fighting in Donetsk, but no one had an official position. The buses then stopped functioning, then started again. I made a decision according to the words of a bus station employee: “Yes, everyone seems to be driving normally, you will get there.” It was necessary to go through the territory of Donetsk, where it was unclear what was happening. Then on the territory of Ukraine with the sign “Moscow” on the bus. We passed checkpoints with armed men, shot cars and houses smashed by bombs. Then my fears that nothing would work out and I would have to return back to Ukraine simply disappeared. We spent about five hours on the route, where the possible consequences are clear, but the probability is unclear. There’s no way I would do that today. I would not put my family at risk and came up with another way of moving, as this risk could have a very negative scenario.
When you have filled out the risk matrix, you need to start planning your response to them. I learned to work with risks consciously in red_mad_robot. When planning any project, there was always a slide with risks and options for working them out. I’ve always been surprised: what does it mean that there are so many risks in the project? What do you mean, they may not pay? So maybe you don’t need to get involved in such a project? Maybe it’s better to take projects without risks? But people didn’t have any panic. Experienced managers planned risks and how to respond to them. Everyone calmly discussed the action plan, and at the next meeting, some of the risks disappeared or went into the yellow zone.
Be experienced managers of your life. Plan to work out the risks. Make a risk matrix, look at it and ask yourself what you can do to avoid risks or minimize their damage. If it seems that nothing can be done, then you do not need to immediately go to write a sad post about the injustice of being. Try to dream up solutions, and then gradually structure your fantasies into understandable tasks. Imagine that your goal is to level out every risk, and run the tasks using the GROW method. Write down the received options and take them to work.
Risk 1 > what will I do to avoid/circumvent/reduce the probability.
Risk 2 > what will I do to avoid/circumvent/reduce the probability.
Risk 3 > what will I do to avoid/circumvent/reduce the probability.
When we approach the topic of risks with our mentees, I suggest that they learn to play chess. This game is based on risk planning as much as possible. You analyze all the options for the outcome of events, considering the risks. The computer analyzes all possible combinations and selects the best one. We don’t have a computer in our head, but we have critical thinking to model events and look for risks in them. How Elizabeth Harmon in the TV series “The Queen’s gambit” played chess games on the ceiling, imagining a board. Do not forget that you do not need to plan risks in isolation from your goals and key results. Vygotsky’s ZPD also works here. If your goal is to get a new job, and the first key result is to get the skills for this job, then you do not need to think about the risks that your boss will not like you. Think about the risks that will prevent you from getting the right skills. Move forward.
“There may be further actions…”
V. Klitschko
Move in the fog with clear steps, and do not run into it to frantically try to navigate the terrain. Take risks like bosses of uncertainty, similar to a computer game. It will never be clearer than now. There will never be any guarantees. You will always follow a new and unknown path for growth. This involves working with risks. Therefore, treat risks coolly. Use critical thinking, take risks consciously and watch the TV series “The Queen’s gambit” if you haven’t seen it.
