Edrich is a visiting professor of enterprise and operational risk to a number of UK and European universities and makes regular television and radio appearances. She is the founder and principal of Kai Corporation (Risk).
Risk and risk management is big - really big - and yet it has no common language. Even within individual sectors, the same terms can be used with completely different meanings. Insurance, reinsurance, financial, commercial, manufacturing, retail, central and local government all have their own terms and ways of doing things.
The scope to which structured risk, opportunity and alternative risk management can be applied is enormous. But we are never going to get full adoption of risk assessment and management until we have a common set of ideas of what risk assessment and management actually means. How is it that finding a common starting ground and common definitions is such a challenge?
I believe the reason is a combination of inertia, intellectual pride and poor knowledge management. Every sector has reason to believe it was first to create or develop an aspect of risk management and every sector holds true to its own definitions. Knowledge management and sharing across sectors is so poor that each sector is as likely to reinvent the wheel as it is to apply models or paradigms from other industries.
Insurance is the indisputable originator of outsourced risk transfer. Think of terms like information technology of disaster recovery, accountancy of corporate governance and banking of credit and market risk - and the story doesn't end there. Different associations, academic units and even institutions vie with each other in the development and promotion of standards, qualifications and accreditation.
Each different voice weakens the big picture. It decreases the intuitive understanding that risk and opportunity should be measured and managed for every human endeavour. It weakens perceptions of the overall logic, the likelihood of full implementation and acceptance and integration of total risk management into its rightful place.
Until we have accepted definitions or sets of definitions, techniques and models, we will not be able to fully understand the real, long-term consequences of our actions. We will never fully understand our value chains, the full exposure to which we are faced and the impact of sector and country risk events on local and global economies.
We can continue assessing and managing risk with a reasonable level of confidence at our local or specialised levels, but without greater consensus, co-working and understanding, we will continue to affect the global economy in the same way a parent brings up a child - trying our very best to do what is right, but not having much of a clue as to whether what we're doing really is best for the future.
Whether we continue the same way we have in the past or work together to a better and more consensual view of total risk management is up to us - writer and reader alike.
