instructor Hood's Key Ideas from The Leader's Guide to Managing Risk
by K. Scott Griffith

If you strive to be reliable, doing something just once in a while is insufficient – even when you do it well.

“To be reliable, high performance must be sustainable.”

Reliability isn’t perfection. Mistakes and accidents happen. Unexpected and unpredictable circumstances arise. Even performing solidly over time doesn’t guarantee future flawless performance. The risk of failure doesn’t magically disappear. Whether you are analyzing everyday tasks, creating presentations, flying jets, or performing surgery, the risk of failure is always present.

To manage an organization’s risk, leaders must pay attention to each level of its operations. Risk management first requires perceiving and grasping the presence of a risk. 

“One of the biggest challenges you face as a business leader is preparing for hidden risks.”

A leader wrestling with multiple competing priorities might miss non-obvious risks. Indeed, sometimes the risks a leader recognizes are just the “tip of the iceberg,” and graver risks remain hidden under the surface. 

Sometimes systems fail, whether due to human error or technological or systemic flaws. To manage systems and make them reliable, leaders need to understand how they work both when they are functioning properly and when they fail. 

“How can we predict and manage system performance? The answer begins with understanding what shapes system performance – the influences that determine the results systems produce.”

Systems should optimize their core functions, like making calls or sending email messages, while also heeding the functions they may deem less important.

One of the principal socio-technical risks is a simple, unavoidable fact about human beings: they make mistakes. But, as with system failures, organizations can manage and minimize human failures – if their leaders understand how performance works and what motivates and shapes it.

“Most days, the socio-technical combinations of system and human performance produce positive results. Ironically, these same combinations also cause disasters.”

“Highly reliable organizations continuously try to see and understand risk, including internal and external factors influencing their performance.”

Leaders must manage and understand their organizations, employees, and systems. They can’t predict the future, but they do have several ways to assess future risks, including investigations, audits, inspections, employee reports, and “predictive risk modeling.” 

“All methods of seeing and understanding risk have systematic limitations and are subject to human interpretation bias.”

The world has changed dramatically over the past 100 years, from the dominance of cars and airline travel to the internet, with all its upsides and downsides. Dangerous forms of nationalism have arisen and could lead to disruption and conflict. Climate change presents tremendous risk. Still, individuals and organizations are not helpless; they can help mitigate these global risks.

“We live in a dangerous world. Many of the things you and I do in our everyday lives – fly in an airplane, get treated in a hospital, or drive a vehicle, for example – bring with them inherent risks.”

“If we are to manage risk optimally, we must take a deeper dive into the realities of socio-technical risk and think differently.”

Dealing with risk, from your private life to your industry, requires a systematic, scientific approach. 

The best ways to address risk vary depending on the particular risk. The hazards in your personal life aren’t the same as hazards facing your company or industry. Use the Sequence of Reliability as a framework in all instances – by discovering and analyzing risk, and managing your systems and people to prevent harm – while varying your hypotheses, analyses, and solutions to fit the scale and circumstances at hand.