ASQ - Audit Division

Increasing Risk Management Prowess As much art as science

Abstract: Risk management is increasingly the responsibility of quality managers. The typical approaches to implementing and managing risk is based on objectively categorization of events based on rigorous predictions of severity, probability and, in FMEA, detection. This rational categorical approach provides consistency and a basis for organizational decision-making. However, this purely objective consideration of events as high or low risk does not include a key element that underscores all risk management. That key element is that risk only exists as it is assumed and understood by people. It is not a purely objective set of threat vectors. As stated by Deming, management is prediction, and that is particularly true for risk management. Deming also showed how profound knowledge is equally parts objective and subjective. Applying that to risk management reveals a need to combine the objective calculation of consequence and probability with the psychological factors such as fear of losing and desire of winning. In other words, risk management is as much about the organization’s attitude of risk as it is about a red, yellow or green location on a risk breakdown structure. Risk and quality managers need to ensure that not only is there alignment of the operational definitions but also a broad appreciation of subjective factors such as risk tolerance. Psychology and sociology play a major role as group dynamics accentuate both fear of risk and risk seeking behaviors. To help teams learn not only the objective side of risk management, there is a novel approach that allows teams to simulate risk situations and to see how they profoundly manage risks. Using the science of play, scrimmage type events can not only refine the operational definitions of high risk, but also unveil the equally critical attitudes towards risk. This dynamic approach improves the art of risk management and provides quality managers with a sneak preview of their organization’s knack for risk management. This talk will show ways to help a team appreciate their risk posture by scrimmaging their situations and seeing how risk is considered and managed.

Keywords: Risk - Risk management

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