Peter Drucker wrote, "Every decision is a risk taking judgement." Managing risk is managing uncertainty of the outcome from current actions. Risk management is implementation of controls to reduce the potential of unwanted outcomes and increase the likelihood of desired outcomes.
One person's unwanted outcome is another person's desired outcome. For this reason risk is perception.Bertrand Russell said, "Even
when all the experts agree they may well be mistaken." For this reason we need to take a fresh look at each situation rather than assuming the results of a similar situation will have the expected results. Often experts are biased by prior experiences resulting in missing the details of the current situation. There are situations where people new to a subject discover flaws the experts did not see.
When Mike managed Information Systems Policies and Standards at the world's largest biotechnology company, he put in place a review process where all people in Information Systems had an opportunity to review and submit comments on documents prior to release. The documents were written by the subject matter experts. Many of these document were withheld then modified due to comments from people in the field. The people in the field discovered flaws the experts missed or inserted.
The amount of effort input to managing risk for a product or project is related to the business case. A product development for a regulated product such as a drug or medical device may allow the project manager to accept much downside risk when the project is to determine the capability of proceeding with development of a prototype. When the project will deliver a commercial product the project manager is very risk averse. The potential downside risks must be identified and mitigated.
Research shows project managers tend toward risk aversion regardless of the intent of the project. They ignore the business case of allowing failure and become conservative by not accepting downside risk. This action induces organizational risk when the project manager reports the downside risks are greater than would have been discovered when the project was run aggressively allowing potential failures. The business may fail to peruse opportunities for new products.