Managing risk through the veil of ignorance

Alasdair Marshall and Udechukwu Ojiako

Journal of Risk Research, 2013, vol. 16, issue 10, 1225-1239

Abstract: Background . We view overconfidence within risk management as a problem likely to manifest within philosophical preferences for anticipationism over resilienism, and in assumptions that risks are objectively real external powers or potentialities rather than subjective knowledge propositions. Methods . We argue that the realist tradition within Italian social theory, first crystallised by Niccolò Machiavelli and later elaborated by the sociologist Vilfredo Pareto, offers valuable lessons for corporate risk management praxis by demanding that we map out the complex relations between the risk subjectivities of risk managers, and their objective risk environments, from a standpoint of psychological and sociological realism which stresses the risk ignorance of practitioners. We caution that risk management efforts to improve risk subjectivities to achieve perfect veridicality to objective risk environments might often amount to a wishful bildungsroman of epistemological growth, reflecting the common aspirations of risk managers to demonstrate professional competence. We suggest that the profession should control this overconfidence problem by stressing the corrigibility of risk subjectivities with reference to sociological understandings that reflect on the widespread risk ignorance that can persist and even intensify where risk management effort is made. Results . Following the macrosociological framework sketched by Pareto, we show how two common 'modes of uncertainty' can be scrutinised for their adaptive fitness to two common types of risk environment. Conclusions . It can be helpful to think sociologically of organisations as engaging with some highly significant strategic risks blindly through a veil of ignorance .

Date: 2013
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DOI: 10.1080/13669877.2013.788056

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