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Elements of Risk—Part One
by Rod Johnson

Contaminated vegetables. Product recalls. Biotechnology. Nanotechnology. Pharmacology. Foreign trade. National security. Homeland security. Airport security. Catastrophic flooding. The list goes on and on. Some are broad ranging and complex with many potential decision points along the path. A few possess significant knowledge and technology gaps, where decisions that are being complicated might contain explicit trade-offs and unintended consequences. Others may simply require an ample amount of time to solve. And for still others, proven strategies and processes for solving specific problems are in place and ready to be initiated at a moments notice. But each problem-solving scenario is unique, no matter how common or complex it might appear. And this uniqueness should not be underestimated.

However, too often processes and methods for problem solving are perceived and acted upon as if they are one-dimensional in scope. Often, this is an error as there are numerous interfaces along this journey. Possibly the single most important interface every problem encounters is risk. Yes, problems and risks are intrinsically linked to each other – like a brother and sister. At times they fight incessantly with each other, each having opposing interests and perspectives. And at other times, they work together like a finely tuned watch. Regardless, one should not consider solving a problem without considering the risk associated with it. Yet this is what we commonly do.

Whenever and wherever a problem arises, it’s imperative that a perceived risk is directly linked to it. Inside this linkage that lays another type of problem. If the actual risk of a problem is underestimated, we could experience significant harm. Maybe we decided it was unimportant and left the issue unresolved and in the end, it bit us. At the other extreme, if we overestimate the risk we end up spending too many of our valuable resources on a problem of little consequence. For instance, an accidental cut to a person’s index finger has risks associated to it. Ninety-nine point nine percent of the time you can place it under water, put a bandage on it, and it will heal on its own. However, there is a risk it could manifest itself into something more serious. In these instances, you must monitor and assess progress toward healing. If we were perfect, we would inherently know how to access the risk associated to a problem accurately, dedicate an appropriate amount of resources ((time, money, personnel, etc.) to the problem which would likely lead to a desirable outcome.

I can remember a time when I was meeting with a client regarding a particularly persistent problem. It dealt with the issue of domestic vs. international trade. Volumes are written about this issue yearly, including Thomas Friedman’s bestseller, The World is Flat. But we tend to possess personal biases on such thorny issues. This is nothing to be ashamed of – it just happens. We both knew what the problem was; our difference lay in the inherent risk tied to the problem. My client thought the risk was minimal, and could back up his position with his personal beliefs, statistics and a couple of industry trade rags. I, on the other hand, was concerned that the risk assessment was potentially too low, so I asked my client a simple question,

"What if the world doesn’t work the way you think it does?"

The silence that followed was defeaning. I knew I had smashed through the Berlin Wall he had built in his mind on this issue. As the seconds ticked by, the expressions on his face grew in intensity. And then he took a deep breath. The words he uttered at that moment were positioned to deal with the problem at hand, and ready to reevaluate the inherent risks tied to the problem. A new and challenging journey was underway. This journey started with a simple question and made him aware of a previously unrealized problem that impacted every department and employee in his company. All the sacred cows were led out to pasture.

Risk is a basic component in every aspect of agribusiness; from the trading of a bushel of grain to China, to the delivery of safe and wholesome food products to the American consumer. Every dot along that journey has checks and balances in place so as to minimize risk. However as we know, very few systems are failsafe in scope and design. There are gaps. In Part Two, I will address how we inherently misjudge risks in our personal and professional lives, and what we can do to avoid them.

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