Risk Myths

Over the many years of doing, assisting, and teaching risk management, Wintergreen has encountered many misconceptions regarding risk, what to do with it, how to manage it, and how to make risk work for you.  Some of the “Risk Myths” we have encountered are shared below. 


I have a small business (or business unit) and as such we don’t have risks.

All businesses have inherent risk. Often times, managing risk is the keystone of our decision making and what business (big or small) does not make decisions on a daily basis. My experience is that while big companies can have bigger risks on an absolute basis, they also have more resources available to handle these risk situations. Smaller businesses, or business units, on the other hand can have many of the same risks (on a smaller relative scale), but don’t have the same range of resources to help them. 

We are a conservative and cautious company and therefore have little to no risk.

This is always a good one. Every business has risks. If a business thinks that they have few or no risks, it is because they do not see the risks or choose not to see them. On a more practical side, a basis economic point is “The bigger the risk, the bigger the reward”; on the flip side, the smaller the risk, the smaller the reward. I suggest that in order for our businesses to grow and be successful, they need risk. They need to push the envelope; push beyond their comfort zone; and provide an offering that surpasses their competition. The trick to doing this is finding a way accomplish this step without “rolling the dice”. To try to avoid all risk is to make your business static and slow to grow. There’s an old adage that if you are not moving forward, your competition is gaining on you.

The owner of our business (or my business leader) handles all of the risk management activities.

I have talked with many small business owners and managers of small business units within larger companies. When your business entity is small, it may be easy for you to touch everything everyday and be an intimate part of every decision or activity. However in your success, your business grows and gets bigger or you get promoted within your company to a bigger business unit and now you cannot be the center of every decision or activity. A good risk management program is a company culture or business mindset and should be integrated throughout your organization. 

Risk Management stifles our business. It is all about saying no to any new idea.

Some companies operate their risk management program in a say no first manner. It is easier to say no and move on and in the short term, one can be effective with this approach. However, a well run risk management program is not about saying no; it is about finding ways to say yes to growth opportunities for your business and to do so in a way that doesn’t put your business in harm’s way. 

A good risk management plan should be very confidential and reviewed annually.

Our business secrets should always stay secret. However, the plan that outlines how our business will define risk, measure risk, will lessen the impacts of the risks, and how to grow these risks into opportunities should be shared with the ones in your business who are in the best position to actually implement the plan and produce results. In my experience, these are the people on the front lines or the work face of your business. For your risk management plan or risk action plan to be effective, it needs to be reviewed and adjusted on a regular and frequent basis. You will find that as your business grows, progresses, or even sits idle, some risks will expire, new risks will arise, risks will change, your strategies may need amending for effect, or a whole new approach may be needed. Risk management is a dynamic topic and should be integral to your daily business activities.

We can hire an outside consultant once or twice a year to handle our risk management needs.

Outside consultants can be a big help to you as you develop your business’s risk plan and program.   Their best help comes in the role of a coach, catalyst, and facilitator. Your risk management program should be an integral part of your business strategy and operating procedures. Hiring a consultant to do your risk management is doable, but not recommended. Having a consultant to teach and coach your team to manage risk from the inside out is a much better use of your resources and will produce much better results.

We only need to train our senior management team on doing risk management.

This may, at first, seem like the proper response. After all, it is a company’s senior leadership that steers the course of the business and avoids the risky pitfalls for the business. However it is often the case that the many small decisions that occur on a daily basis and made by those on the front line of your business that can bring a larger risk into the business. All levels of your business should have some training in the fundamentals of dealing with risk; if for no other purpose than to educate them to identify a seemingly innocent situation that should be brought to your attention.

Risks are bad and should be avoided at all cost.

Some of the biggest risk takers I know are also some of the most cautious people I know. They understand that to grow and make profits, risks will be encountered and their secret to success is to learn how to understand, analyze, and deal with these risks. After they have done their research, made their analyses, and feel comfortable with their conclusions, they make the bold decisions. To others it may seem like rolling the dice, but to adept risk managers, it is just another step to growing the business.

We always do risk management and keep the current risk plan in the file at all times.

In my years of doing and teaching risk management, I have seen some outstanding Risk Action Plans and many of these plans were kept in the file and kept confidential and not implemented or implemented on a very limited basis. The true value of the risk management process can only be achieved when the risk plan is implemented, tracked, monitored, and adjusted as necessary. Only then will you see your Risk Management Program and Risk Action Plan add value and profit to your Business’s bottom line.

We hired a Risk Manager and he can handle all of the risk activities.

Before I retired, I worked for a large international company, but we had very few full time Risk Managers. The vast majority of the risk positions were portfolio assignments to existing operations positions; from Vice Presidents down through the organizations. A good, value adding risk management program is integrated well into the daily operations of your business and its organizations. A full time Risk Manager should be used as an enabler or a coach and not a doer or an approver.