When coaching in risk management we sometimes say that this process is nothing more than the application of sound common sense.
We know in this world common sense is not bestowed upon nor simply a gift presented to us all at birth. We understand common sense in managing risk is like perfection to lean management, something to strive for but in the end simply unattainable in its purest form. When it comes to making decisions in life or business, no one is immune to lapses in their commonsense judgement.
If risk management was common sense the world would be a less volatile and simply dangerous place. Global politicians would make better decisions and enact sound policies to protect their people. Business leaders would act ethically and make quality decisions which would not run their company aground or circling the capitalistic drain.
History is littered with examples of common sense failures when it comes to managing risks and anticipating problems that are sure to arise if non-action is the only option. However, it is too easy to judge past events when uncertainty has played her cards and the damage is already done.
Howard Marks states that one of the first lessons he learned when walking into the prestigious halls of The Wharton School was to always judge the quality of decisions at the time they are made, and not based on their outcomes.
Outcomes do not give us the best grading of the quality of decisions, as uncertainty can take a quality decision and throw it straight into the center of the erupting volcano, bursting it into a thousand flames. It is better to focus on the intentions or process of the decision when it is made as this helps remove “outcome bias” which can hurt our future decision making processes, than if we simply focus on outcomes only.
We can only make decisions with the best possible information we have at our disposal, at the moment a decision must be made, while also taking into account possible outcomes that could differ from expected outcomes. Unfortunately, humans must deal with other variables which cloud decision making processes and hinder common sense rules from being applied.
Organisational politics, cognitive biases, internal motivations, and myopic perceptions are among a long list of risks to our ability of applying common sense in decision making processes.
The challenge is to be aware of these obstacles to remove their powers over our ability to apply common sense rules. It is often easier said than done, but like recovering from an addiction, one of the first steps to recovery is to accept that a problem exists, otherwise any recovery efforts will be severely hindered.
If we can remove all the noise and clutter around our decisions involving risks, we can start to let our common sense flourish, which will steer us in the right direction more often than not. Identifying cognitive failures and other external variables which can adversely impact our commonsense abilities is needed to avoid future problems.
The lesson is that common sense is sometimes all that is needed to substantially reduce the risks in the world around us, to bolster our decision making processes using the instinctive cognitive functions we are all born with. Born with but not applied consistently by most. So see through the noise and let your common sense help deliver you to your destination, unscathed by the randomness lurking in the shadows.