Estimating The Risk Involved

The heavy sword hung from the palace ceiling by a single horsehair, its sharpened blade pointed downward as if an invisible hand executing a lethal thrust from above had been suddenly stopped. Directly below, in sharp contrast to the image of imminent violence, a man sat on a regal bed of gold, surrounded by delicacies of food and drink while servants attended to his desires.

The sword belonged to Dionysius II, the king of Syracuse, and it loomed over Damocles, a subject of the monarch who was receiving an unsubtle lesson in the perils of power, simultaneously enjoying its benefits while being made acutely aware of its mortal dangers.

I remember the story from my youth. The aging volume my mother gave me showed Damocles staring upward at the sword, his entire body tensed in apprehension, the onlookers exhibiting both horror at his predicament and relief in not sharing it. I don’t remember giving much thought to the likelihood that the tiny strand of horsehair would give way, letting the sword plunge into Damocles, or whether the weight of the sword, height of fall, and sharpness of the blade combined would inflict a serious wound. Even then I understood the probabilities of those factors were beside the point. The lesson was that frequently individuals, and most particularly leaders, operate in an environment of constant risk. The sword may not be so evident, but it is there. We must learn to live with risk, and even better, do something about it. Although many brilliant minds have studied risk in detail, their theories and prescriptions rarely determine how each of us actually approaches the ever-present challenge of risk. At least that hasn’t been the case for me or any of the organizations I’ve been a part of. So while understanding the more theoretical aspects of risk can be valuable, knowing how each of us—and our teams and organizations—actually perceives risk is essential.

This is easier said than done. There’s something highly subjective about how we consider risk, both individually and collectively. At the most basic level, I have always viewed risk as the probability of something unwanted happening (e.g., Damocles’s horsehair breaking), and the potential consequences if it did. At the most basic level, the combination of those factors constituted my estimation of the risk involved.

Regardless, in the long run, what might happen holds less interest to me—and certainly less practical importance—than what I intend to do about it.

In some cases, as with life insurance or seat belts, I dutifully take steps to mitigate the impact of a negative event. In other cases, like when I’m driving or managing my finances, I try to maintain the agility to react to changing conditions and emerging threats. And in some instances, I irrationally deny the existence of the risk or hope that probability will work out in my favor, like those who ride motorcycles without helmets or smoke two packs a day. Sometimes I’ll study situations extensively, but on the vast majority of risks I encounter (even some big ones), I rarely do the due diligence to determine mathematically what the best move is. I’m guessing I’m about average on all these.

While we need to do our due diligence and make well-informed choices, we can’t live life inside a spreadsheet trying to tabulate the countless risks that we encounter every day. Even if we were to determine mathematically what the best move is, we can’t ever account for all factors, and in a fast-moving, complex environment, such an approach would likely increase risk by giving an illusion of completeness impossible to attain. However, developing a thoughtful appreciation of the threats we face, our vulnerabilities, and the resulting risks can be hugely beneficial.