Risks transition from potential risks to become active risks when the status quo, current situation or general state of something change. The more rapidly any of those change takes place, and the more widespread their effect, the greater the impact of active risks become.
Since we now live in the most rapidly changing period in human history, on all fronts (technology, science, medical, social mores, communications, transportation, interconnectivity, economic, gender identity, definition of family, information, etc.), and our increasing pace of change is likely to continues accelerating into the future. As a result, we’re now seeing things that aren’t supposed to happen beginning to happen more and more frequently.
The accelerating pace of worldwide change, and increasing interconnectedness of the world, insures we’re going to see more and bigger risks, and more and bigger opportunities hurtling toward us faster and faster in the future. Recent examples include the 2008 global financial crisis, the BP oil spill, JP Morgan “London Whale” multi-billion trading losses, the Asian tsunami and Fukushima disaster of December 2004, Toyota’s unintended acceleration scandal, Takata airbag scandal, Volkswagen emissions control computer scandal, The Arab Spring and BREXIT.
Our traditional ways of dealing with risk in indirect, passive, situational and/or reactive ways just don’t work as well as they used to. We’ve crossed a critical inflection point where what’s now needed in our rapidly changing, less certain, higher volatility world is that we address risk in a new, direct, proactive, and comprehensive way. A method that’s based on a deep knowledge and thorough understanding of the true nature of risks, and full commitment to advance preparation for the risks we all face.
We know that risks will occur, we just don’t know when. Therefore, we have the choice to directly and actively manage the risks we all face or suffer the consequences of those risks controlling us. It’s just the manifestation of the classic requirement of the second law of thermodynamics (entropy) we reviewed earlier. To avoid things breaking down, not working or risks controlling us, we must invest additional work, energy, effort and preparation into the system.
E. Recognize, Understand And Prepare For The Two Broadest Categories Of Risk?
External Risks:
Although when we think about risk we almost always focus our attention on all types of “External Risk(s)” There’s another high level category of Risk that we talk about a great deal, but don’t actually do much about.
Internal Risks:
This especially insidious form of risk can cause us as much or even more harm, and it needs a great deal more attention… That category is internal risk or risk/reward decision-making risk. It’s an especially challenging form of risk because of the many behavioral biases, heuristics, perception reality gaps, assumptions, misperceptions and ingrained decision-making flaws we all naturally carry with us. Although it should be more preventable, these missteps can be especially problematic because our innate “brain bugs” make it extremely easy to unconsciously act against our own best interests.