How do you respond to risks?

risk, harvard kennedy school of management, world economic forum

The majority of people either panic or ignore the possibility that a crisis is developing. But that needs to change, unless we want doomsday scenarios to manifest in the future. Watch this really interesting short video with David J. Ellwood, Dean of Harvard Kennedy School of Government, talking to The World Economic Forum about redesigning risk response:

Why do we see a crisis coming, sometimes even have the solution, but as human beings, or nations, seem unable to do anything about it? Why don’t we act but opt for worrying or ignoring the issues? By doing so, these crises could develop into catastrophes.

One reason is that we are short-sighted and blame others. Another is how businesses react if they know that they will be asked to make a sacrifice to sort out the problem. They then  swiftly come up with statements such as “science isn’t very clear..” Recognize it?

But sometimes we act in time and solve problems. The hole in the ozone layer is an example.  The picture of the hole made the problem visible and US multinational DuPont came up with an incentive to work with governments and NGOs to find solutions.

How do you create leaders that respond to risks by finding solutions?

Leaders have to react in time and be able to ignore their aversion to acknowledging danger.

A lot of young people all over the world are keen to step up to the plate. But it’s expensive to learn and they don’t earn very much once they have graduated. So we need to find ways to make it worth their while.

They need to know about incentives, markets, risks and politics. And not to forget, public management. So, apart from studying, they also need to get out and deal with real problems. An understanding of the economics and politics of different issues facing us is crucial. Ellwood put it the following way, “The frontiers of education gives us the opportunity to get to the frontier of the acting in time problem”, and added, “if we can train both existing leaders and people who aspire to become leaders to take on the really hard future challenges with the tools to do so, we can meet and avoid the future crises we see coming but are not acting upon today”.

Is Ellwood right that we need to develop a new kind of leader that knows how to respond? Do you agree that panicking or ignoring crises have to stop? That leaders need to learn to deal with the problems we know we will face? Is it time to start thinking long-term and stop closing our eyes to what will develop into a crisis if we ignore it? 

Video: World Economic Forum – Picture: Billy Gast

74 thoughts on “How do you respond to risks?

  1. We see the short sighted issue and blaming others all the time. I heard one reason why some people are not concerned about global warming, is because it is so down the road.
    We do the same thing, crisis is like the headlights of a truck heading toward us. Sometimes you do not worry about it, until it is so close you can't jump out of the way of it.
    Thanks for sharing this informative post with us.

    1. Yes, William, that's unfortunately what happens frequently. No wonder those people panick when disaster hits "out of nowhere". Wouldn't it have been better to recoognize that there could potentially be a problem here and figure out what to do if it does indeed be the case.

  2. Unfortunately, we are sorely lacking in leadership in government, especially here in the U.S. Republicans who control Congress hold up legislation and there is a backlog of candidates for high-level government positions that are languishing in committee because of politics. Politicians everywhere don't want to govern. They are more concerned with getting re-elected. They are wedded to ideology and not to doing what is best for their country such as confronting the many risks we face.
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    1. Spot on, Jeannette. Hope to God the US system will never be implemented in the US. We, and the rest of the world for that matter, have more than enough problems because of Milton Friedman's version of enonomics.

  3. I agree with his concept but I'm not sure I see our educational system producing the type of leaders we need. In both politics and in business governance one of the issues is priorities. Climate change is a good example. Do our political leaders take the actions we need to slow and deter climate change if doing so means raising taxes which can cost them votes? Similarly, will our corporate leaders commit to responsible climate policies if it means increased costs that can't be passed on in prices due to competitive issues?

    1. Glad you agree with the concept. Doubt that there has ever been and ever will be an education system that can teach people to become leaders. How do you teach people to be willing to take risks and have courage? The problem with leadership in the United States is that corporate America is in charge not your politicians. The latter just do what corporate America wants in order to get the donations they need to get elected. It's not like that in Europe, which I'm grateful for because how can you have democracy when politicians do what their sponsors tell them to do. Corporate America is, for instance, of the opinion that climate change is not taking place. So..

      1. It's probably even more cynical than that Caterina. It is not that corporate America doesn't believe climate change is happening, it is more that they don't want to have to do anything that would change the way they operate or raise their costs. So they fund a bunch of clowns who deny it's an issue,.

        1. Of course it is. Mind you I have worked on that high level most of my life and honestly believe some of them believe what they advocate, for instance that climate change doesn't exist.

  4. Catarina, this is exactly the message I was trying to convey through my post this week. We have a looming global problem but if we don't act to solve it soon the consequences will be dire. So I definitely agree with Mr. Ellwood that we don't manage risk but tend to ignore it until it may be too late.
    I also agree that young people are the hope for the future. When my daughter-in-law had to fly for a business trip, her six year old daughter told her they would have to plant a tree when she returned to erase her carbon footstep. The young are not only very aware but know the need to act.

  5. ““If you’re not a part of the solution, you’re part of the problem.” I live in a high risk earthquake zone, a consideration that horrifies me. Nobody has any control over an earthquake happening; there is no “solution” to prevent one. What we do have control over is the degree to which we prepare in the event of one. If we do not prepare (and believe me, there are plenty of us who stick our heads in the sand), we are making a potentially horrendous problem even worse.

    In the event of natural disasters, it’s not all about what the “leaders out there” can do for us. Each time we as individuals move through fear to continue with our ongoing preparation, we help to minimize the “even worse problems” that could occur. Each time we make headway (no matter how seemingly small) for ourselves and our families, the more we are able to breathe positive energy into the collective whole. Our pro-activity provides valuable leadership, no matter how modest it may seem. Others are encouraged to follow suit, which in turn encourages others. True leaders help empower others to do what is right and appropriate. We’d all do well to develop this kind of leadership skill.

  6. Leaders should have the confidence to make informed decisions. I agree that we are in a blame culture – very few want to take responsibility and prefer to pass it on.

    1. True leaders, i.e. not managers, are much better at dealing with risks than followers. The latter category start the blame game and expect someone else to sort things out.

  7. I think we sometimes avoid dealing with potential crises because of a combination of wishful optimism and a fear of conflict. But dealing with the small issues is the best way to make sure they don’t turn into big ones. I think training can help. When I studied risk management components within project management we were shown to identify potential risks and problems ahead of time, identify what signs might occur to indicate the problem was manifesting itself and identify corrective or mitigation actions ahead of time. It is not possible to identify all problems ahead of time but this kind of thinking helps one look at issues differently, learning to spot the little things that can become big.

  8. I do agree that panicking, ignoring, and placing blame on others has to stop. I feel the role of leaders needs to be forward thinkers in all areas, that includes the bettering the environment. Thanks for sharing. Always a pleasure.

  9. Really enjoyed the video. I thought about the leadership of children today. After seeing an interview with Princeton Graduate students it was an eye opener. The students were asked what they wanted to do now that they graduated. The majority said they didn’t know and many said they need to ask their parents. So much is done for the children of today that they do not know how to take a leadership role.
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  10. There is a growing trend towards Risk Management in business with the growth of Organisations such as GARP (developing financial Risk Managers). Especially after the global financial crisis i believe we have seen alertness especially in the financial sector of how improved risk management is essential from profitability, sustainability and compliance points. Everyone in an organisation needs to be groomed from a risk management stand point as one weak link in that area exposes any business to collapse.

  11. Catarina, this is a great topic you've brought up. I think the problem with leaders today is that there is SO MUCH data available to them, they delay decisions because they want to take the time to sift through it all to make sure they are not making the wrong choice. Future leaders need to be able to let go of that worry. Mistakes are what make leaders, it's going to happen. And if they can recognize and react like they need to then many of these issues will never have to turn into something worse.
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    1. Well I think that although future leaders need to have expertise in diverse areas (economics, marketing, politics) like he mentions it needs to be a high level understanding so that they can make decisions quickly. In my opinion leadership is not about having all the information to make a decision, rarely does a leader have all the information. It's about making a judgement call once you have "enough" information. Taking action is what he suggests needs to happen to avoid issues escalating. And my point above is that with big data available now leaders are going to delay and delay and delay saying that "the science isn't there" which is their way of saying "I dont' want to take action". Along with the board subject matter training, growing leaders to take action IN SPITE of missing data is key.
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      1. The main reasons politicians do nothing is because their main priority is getting re-elected and pleasing their donors. Simple as that, Bravo. Look at US politicians, what have they done to avoid the possibility of say, global warming, happening in the future? That’s right, nothing. And the reason for their inactivity is not overload of information.

  12. This topic was actually covered in tonight's news broadcast on our public TV station. The subject was global warming and its effect on Miami Beach — a section of Miami, Florida that is actually on a barrier island between the Atlantic Ocean and Biscayne Bay. One of the scientists mentioned that the current crop of elected leaders seemed willing to deal with the problem long term which is the only reasonable way to plan. However, he was concerned that he could not predict how the next step of officials elected would react. It doesn't help that in the US, global warming is a "hot button" divisive issue with the Republicans denying that there is any man made component to it.
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  13. Honestly I think most democrats could respond to risk much better. Obama seems to bury it. Others walk around it looking out for their own goals. Pretty soon there are too many small risks to even address the big ones. It's a really big problem in the US, at least, Cat.
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    1. Greg, don't you think that politicians, regardless of party, could respond to risks much better? What has any US politician done to prevent global warming from happening?

  14. I think this is our main Problem that many people around the world are screaming about the problems and the people who can help in solution ( like our Leaders/government ) do not pay any attention to issues when it is the right time as they are busy filling their pockets and converting black money to white …..

      1. Hi again

        Yes I what I have written , I have kept the leaders and corrupt bureaucrats of my country as I tried to refer to them ( Like our Leaders) ….. Our problem is in Kashmir , we have two layered corruption
        One from Pakistan / India
        Second from so called leaders of Kashmir….
        May be you have read about devastating earthquake in Kashmir Oct 2005… People helped from throughout the world and their aid is still stored in official buildings turned in rags and now over many years time it has become useless.
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  15. It's difficult for the private sector to solve macro problems without government involvement. It's takes time, money and legislators and regulators that are willing to enable solutions. Government should enable, not impede. But those who govern have one eye on their voter base and one eye on their donors. If a solution doesn't satisfy their constituents they won't act on it. Think global warming. Think healthcare. Think poverty. These aren't intractable problems, but leadership is lacking.
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  16. There are several things that prevent people from directly addressing an issue. In everyday life it sometimes just seems easier to ignore problems, though in the long run it's not. But when it comes to a large business or politics it is much more difficult.

    We may have leaders who are willing and able to address oncoming issues, but a part of living in a democracy includes the need to convince others that they need to both acknowledge the issue and agree to a resolution. The bigger the company or government the less likely this is to happen.

  17. From what I've seen young people are aware there's a problem and have different ideas on how to solve them. One thing my son says is that leaders don't have incentives to think long term because they're always worried about the next election. He also thinks representational government should be different and because of technological advances we can have a moot more responsive government than what we have today which is really based on what worked fifty to a hundred years ago.
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    1. Yes, politicians only focusing on getting re-elected is a huge problem, Pat. But another problem is that they are dependent on the corporate world to finance their campaigns. If that system is not changed the ones who are young today will behave like today's politicians if they are elected.

  18. Society as a whole does not value long-range goals that require a concentrated effort of critical thinking. Look at how the U.S. goes gaga over presidents who act quickly despite disastrous results. Such paradigms need to shift, but how to make that happen since it goes against human nature in many ways is anyone's best guess.
    My recent post How to Find a #Critique Partner and Set Ground Rules

  19. This was really interesting Catarina. I think leaders are concerned with getting elected and the staying there, and that the system is set up this way. It would take a change of the system to allow somone to come in and really take rsks and make changes. Hopefully that will happen.
    That being said, I am guilty of worrying about things instead of actually doing something about it
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  20. Another reason is that most people feel they are not 100% accountable for anything. Really. How many people do you know even in a marriage who acts like they are 100% accountable for the relationship? It's similar with responding to risk. Our leaders, who can we name who is 100% accountable? I cannot thing of one. There are a couple of people on the speakers circuit who talk about this 100% principle and this response to risk falls into this.
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  21. I think one of the problems leaders have with risk management is their term of office. They no sooner are in office then they really start campaigning for the next term, in which case they can't afford to take risks and I certainly don't have the answer. Very interesting post.

  22. I agree, Catarina – the issue is that leaders are focused on the short-term (politicians, the next election, CEOs, the next quarter/year) and so are unwilling to take decisions that might be costly in the short-term but beneficial in the longer one. This is why the UK faces the prospect of power cuts in the next 3-5 years (power stations reaching end of life and nobody willing to spend on developing new ones), and why companies ignore issues – preferring to leave it to somebody else to sort out.

    The basic "Fight or Flight" response has been modified to one of "Hide, Flight or Fight"…

  23. What is that saying? Ignorance is bliss? Well maybe not. Let's not forget that change is hard and so many choose to avoid it entirely until it's too late. Power is intoxicating. Those who hold it feel threatened by those who have answers they do not have themselves. Sometimes the answer is not one they want to hear so they don't listen and don't act.
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  24. The one place I really dislike short term thinking is in politics. They may see a disaster looming, but sometimes opt for the short term fix (whilst they are in office). We really need people to stand up and stand out for the future. Providing for a solution many years in the future and leaving that kind of legacy would surely be something for the history books – yes?
    I think it is human nature to stick your head in the sand. It is those that peek around and seek a solution that make such a difference. Wouldn't you think, we would all want to be that person and take the risk?
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  25. Hi Catarina,

    Thanks for that awesome video! I think it makes perfect sense that we become the leaders and develop those around us who are solution oriented.

    As a leader, every adversity is a challenge. Every problem is a challenge and an opportunity. To me, responding to risk is very simple, I love taking risks because that is what fires me up. I take risks which others do not like to take. I think I love Walt Disney for saying, "It's kind of fun to do the impossible!"

    I resonate with him and that is the way I choose to lead my life. And interestingly, I attract people with similar thought process as well. So, life is very interesting!

    Thank you for sharing and have a great day!

    -Kumar
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  26. How do you respond to risks is an important 50% of the issue. At least equally important is the matter of risk prevention. I concur that industry is responsible for many of the greatest risks that our planet faces. Ironically, corporate greed may spawn at least some of the solutions. As you know best practices corporate governance now calls for robust risk management and loss prevention functions. True this is driven in large part by fear of law suits and tumbling share prices . True we still see many giants who take foolhardy risks but in a growing number of cases it is nevertheless productive.. I hope we will see Governments expand the auditor general roles beyond that of simply watching the coffers and create a more holistic role that also has some sway regarding environmental and other major impacts.
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    1. Glad you agree, Paul. However, it's too late to start preventing the issues mentioned in the video. They are already there so what needs to be done is stop them from developing into crises.

  27. I've worked with many different leaders over the years and although they were all very different in their styles, the resistance to dealing with threats in a timely fashion was pretty consistent. It's an interesting phenomena. While it is a good start, I'm not sure if training a few leaders to think differently is enough. I wonder if we don't need to look at our educational systems and ask ourselves what is it that we do that teaches risk aversion to managing risks. Thanks for another thought provoking post Catarina.
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    1. Yes, it's amazing how we human beings like to avoid problems, if we can, isn't it, Debra. Personally don't think avoiding risks is something we are taught at school but human nature.

  28. Great video! I absolutely agree that we should think about developing leaders who are solution minded. And I think there is something to be said for the "cry wolf" syndrome. EVERYTHING can't be a crisis or the very word diminishes in meaning. So maybe as part of developing leaders, is helping them to realize the difference between a problem and a crisis. If we work to reolve the first, the latter might be less likely.
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    1. Glad you agree, Jacqueline. Of course everything is not a crisis. Actually, that depends on how you define crisis:-). But the issues mentioned in the video such as climate change will definitely be a crisis if it comes true. Worse, actually….

  29. To most of us it is easier to ignore problems then face them, with the attitude the problem will go away. People have very short memories.

    Your article made me think of a movie I saw the other night called "The Game", which was made in 1997. One of the comment in the movie was redoing Health Care in the US will cause a crisis and the US should not try to socialize medicine as it will effect the economy. The politicians knew it would be a fiasco but have choose to ignore it. It hasn't and will not go away. The Health Care Law is over 20000 pages and politicians are saying there is no way the President read the law. This crisis will not go away, and offering mandates along the way is not the way to solve the problem. That is really ignoring the problem. Good video
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  30. I so think it’s time. There is a great tendency to stick one’s head in the sand, all in the hopes that what we know to be true or see coming will somehow magically go away. Then there is the economics of the crisis. It so easy to ignore the elephant in the room, all for the mighty bottom line. It doesn’t, it often makes it worse. If we can find the courage to educate ourselves and our future generation to face the hard facts and be more solution minded and collaborative we can find a way to avert most if not all of these pending or future crisis. I think it’s time we figured it out.
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