The Risks of Risk Management

Ian I Mitroff and Can M. Alpaslan
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Ian I Mitroff: University of California
Can M. Alpaslan: California State University

Chapter 2 in The Crisis-Prone Society: A Brief Guide to Managing the Beliefs that Drive Risk in Business, 2014, pp 11-20 from Palgrave Macmillan

Abstract: Abstract This chapter compares and contrasts Risk Management (RM) with Crisis Management (CM). RM aims to calculate the expected damage that crises inflict. To do this, RM multiplies the likelihood of a crisis by its consequences measured in dollars, injuries, and so on. It then ranks crises in terms of their expected damage, and ignores crises that are below a certain cut-off level. Inevitably, RM neglects disasters that are extremely low in probability but high in consequences such as 9/11. CM acknowledges not only the existence of deep assumptions that prevent serious planning for crises, but surfaces such assumptions so that we can confront and overcome them. For CM, the least likely crises are precisely the ones that are most likely to do the worst damage. In effect, CM is the Management of Key Assumptions.

Keywords: Risk Management; Crisis Management; Critical Assumption; Painful Event; Expected Damage (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-45483-6_2

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DOI: 10.1057/9781137454836_2

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