2. Identify Risks
A. Recognize And Understand The Many Uses For The Word Risk.
This point is important, because the term “risk” can carry many different meanings depending on how it is used. If not directly addressed early in your relationship, any mix-up in meanings can lead to serious miscommunication issues. It’s also important to be certain you’re focusing on the risks themselves, not the results of risks.
Here are a few examples of the multiple meanings of the word risk, as articulated by risk communications experts Paul Slovic and Elke U. Weber in their 2002 paper “Perceptions of Risk Posed by Extreme Events”:
Risk as a hazard…Which risks should we rank?
Risk as a probability…What’s the risk of getting AIDS from a contaminated needle?
Risk as a consequence…What is the risk of letting your parking meter expire?
Risk as a potential adversity or threat…How great is the risk of riding a motorcycle?
B. Use An Empowering Definition Of Risk, Rather Than A Restrictive Definition.
No single element of advisor/client communications is more important than being certain that you, your clients and potential clients are in complete agreement on your shared definition of the term risk. When it comes to risk, the basic definition one uses is also the critical foundation on which our entire risk management approach is built.
Our definitions of things are the frames through which we describe, understand and view them.
With a solid, empowering definition as your foundation, what you build will make the job of risk management for you and your clients easier and more effective. It will also serve you and your clients better, and stand the test of time.
With a weak or restrictive definition, even the grandest, most sophisticated risk management methodologies will be compromised, leading to frustration, disappointment and negative surprises.