Comfortable risks?

Playing the global game of risk takes more than knowing the rules. It assumes awareness of perceptions and culture.

BY RICHARD WALKER

Years ago, when I was an undergraduate and supposed to be in the library every day reading the latest in the philosophy of science or brushing up my symbolic logic, I actually wasted a good deal of time playing a board game called Risk. It was a simple game—basic even—and addictive.

If you haven't played it, the proposition of Risk is that each player tries to dominate a map of the world. You build up armies and then launch them against your enemies. With roll after roll of the dice, the armies are worn down slowly by attrition, and eventually, somebody has to retire from the world stage.

If only life and business were so simple. The rules of the game never change, but in reality, the rules governing risk do change—often just when it seems that they are at their most stable.

Hardly considered as a boardroom concern 20 or 30 years ago, when the environment changed more slowly and competition was a lot more predictable, risk management is now part of almost every business leader's mindset. This is true especially when businesses cross borders, as they increasingly do. Not just geographical borders, but cultural borders and the borders that demarcate disciplines.

If you want to know why different cultures or different businesses have varying attitudes to risk, you probably have to ask a psychologist. Perceptions of risk vary greatly from place to place and time to time, making the job of managing project risk complicated.

For example, I was recently doing some work on corporate attitudes toward planning for disaster recovery. I looked at how attitudes concerning the risk of catastrophic interruption of business have changed in the last year, both by business and by region.

I had assumed that in this global business place, there would be a consensus on risk management. Not true. For one thing, it turned out that the level of risk awareness and planning often is a function of the extent to which a business is regulated. For example, national regulators keep finance or pharmaceutical sectors on a tight rein. Regulators often demand some level of risk analysis and planning in the company's annual statement, and sometimes the demands go a lot further than that.

Culture is surprisingly influential too. Disaster planning experts tell me repeatedly that they get a lot less interest from companies in some parts of the world than in others. Apparently there are striking differences in attitudes toward interruption of business. Some companies are in businesses that have to be responsive 24 hours a day, seven days a week. But if a company has its main operations in an environment such as a southern European or Latin American country, where businesses expect to close down for at least part of every working day, the attitude is different. Interruption of business is no longer a crisis, it's a way of life.

As it happens, I was recently in southern Spain and spent many hours driving on the big interstate roads. Time and again, I saw a living illustration of how different the cultures of risk analysis are and how deeply embedded they are. All day, I would see motorcyclists on machines with local license plates, big machines that were ridden very fast by men in shorts and T-shirts. Biker visitors from northern Europe, Germany or Scandinavia, on the other hand, were suited up head-to-toe in thick armored leather, despite the sweltering heat.

Each biker was in exactly the same business: Get from point A to B. They all made an individual risk analysis, but the answers they came up with were different. No doubt they all had a lot in common, but you could not help noticing that common aims and a common risk culture are two very different things. PM

Richard Walker is European business strategy editor of the Economist Intelligence Business Unit's Business Europe, a producer and presenter for the BBC World Service Radio, and a feature writer for The Economist, GQ, Sunday Business and The Sunday Telegraph.

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