Risk management can save lives
The purpose of this write-up is to examine how risk management can be used as an effective tool in the prevention, reduction and management of adverse effects that have negative and sometimes fatal impact on individuals, businesses and even nations.
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Fresh on the minds of every Ghanaian is the horrific road accident involving the Metro Mass Bus killing over 60 people. Residents of Accra, the national capital, have come to dread rains after the yearly flooding and its attendant damage to life and property.
However, a better understanding and appreciation of risk management by all stakeholders has the promise to avert such occurrences.
What’s risk and risk management
Risk can be defined as the combination of the probability of an event and its consequences. According to the Institute of Risk Management (IRM, 2002), in all types of undertaking, there is the potential for events and consequences that constitute opportunities for benefit (upside) or threats to success (downside).
Risk can, therefore, be seen as a variable which can affect the outcome of an event both positively and negatively. However, in general terms, risk refers to any adverse shock from disease epidemics to armed or social conflicts and economic crises.
Risk management is the methodical process of addressing the risks necessarily attached to the activities of organisations with the goal of achieving sustained benefit within each activity (IRM, 2002).
The organisations here may refer to individual households, communities, businesses, governments and the international community (WDR, 2014).
Indeed the concept of risk management is not so new because risk management techniques such as; risk reduction through safety, quality control and hazard education; alternative risk financing; and insurance including self-insurance and captive insurance have been in existence for a long time (Doherty, 2000).
However, recent events all over the world, including financial and economic turmoil have disrupted the world’s economy through loss of income, jobs, and social stability. In Ghana, the June 3, 2015 flood and fire disaster and numerous road fatalities have caused much pain and destruction.
In the face of these challenges, effective risk management which promises to build the resilience of people to withstand the negative shocks brought about by these adverse events and harness the inherent opportunities must be welcomed with enthusiasm.
Risk management to the rescue
Increasing frequent disasters call for the need to acquire the requisite knowledge, adopt preventive measures, develop coping strategies and acquire the adequate insurance to become more resilient.
Thus effective risk management can provide both resilience to withstand negative events and the ability to take advantage of the opportunities for development that are locked up in them.
Proactive risk management is a critical ingredient in the fight to end poverty and the inability to manage risk properly poses significant obstacles to ending poverty and boosting shared prosperity. Effective risk management is, therefore, a powerful instrument for development – building better and more secure futures.
As a people, we need to move away from being “crisis fighters” to becoming “proactive and systematic risk managers.” Risk management provides abundant evidence that recognises and prepares for risk pays off. Proper action from city authorities can significantly reduce the risks posed by the seasonal floods in Accra.
Take the Metro Mass Bus disaster, for instance, it has been revealed that the bus had a faulty break, was overloaded and was driving beyond the speed limit. These are the immediate causes of the accident. Sadly, all are preventable.
To compound matters, we are quick to blame supernatural forces for all occurrences, including those caused by ignorance and negative attitudes. To quote from my book “Manifesting Your Destiny”, we believe our lot is caused by “forces that we cannot control or manipulate”.
Challenges to risk management
The most important element in a risk management process is the level of knowledge one has on the risks that need to be managed. Take, for instance, the risk of contracting malaria.
Knowledge on the disease, the cause, symptoms and treatment options has a great impact on the individual’s ability in managing such a threat. Without the necessary knowledge, the individual will be clueless in managing the disease.
It is sad to realise that relevant information on risks confronting the country are available to decision makers in households, communities and the government.
In other instances, decision makers lack the cognitive abilities to understand the relevant information available.
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Effective risk management comes at a cost. Developing an effective storm drainage system to reduce the risk of flooding is a capital intensive project. Even at the individual level, eating a balanced diet to prevent malnutrition may impose some financial cost on the individual.
Keeping the household and the community clean without choked gutters and acquiring mosquito nets or insecticides to prevent mosquito bites require some financial commitment. In other instances, it is simply the case of misplaced priorities.
One of the most common reasons advanced for the prevalence of our bad state is weak governance. Unleashing opportunities by managing risk is impaired by government failures stemming from capture by interest groups, corruption of government officials, and distortional policies.
Risk management often requires well-structured institutions that understand specific, local, risk contexts and trends. Weak governance structures at many public institutions in the country have led to improper concerted efforts towards risk management.
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Conclusion
An effective risk management can serve as a powerful tool for saving lives, averting disaster, preventing development setbacks, and unleashing opportunities. More discourse is needed on the subject at all levels.
Individuals, households, communities and the nation must identify their peculiar risks, assess them and take pragmatic measures to address them preventing and minimising the inherent dangers and harnessing the opportunities for growth and development. — GB
The writer is the Country Risk and Quality Manager for PricewaterhouseCoopers (Ghana) Limited and a published author. He has extensive experience as a risk management practitioner and a business consultant.