RSS feedsThe public’s appetite for risk has diminished progressively in recent years. Our first inclination is to protect our children from dangers that we, their parents, used to regard as part of the fun of growing up; news of the terrible loss of six British soldiers in Afghanistan grabs headlines almost exactly 90 years after 20,000 died in a single day; and our lives are festooned with warning labels such as ‘May contain nuts’ on a packet of peanuts.
In many ways, it is quite proper that improvements in the quality of life should make us more demanding and less accepting of intolerable dangers. But the truth is that our attitudes to risk can also be very contradictory. Our tolerance for life-threatening failure in areas such as public transport is virtually zero and yet we are seemingly immune to the daily death toll on the roads. The minutest traces of salmonella cause a million bars of chocolate to be cleared from our shelves, though the role of confectionary in contributing to childhood obesity is indulged.
In recognition of the fact that the public holds such contradictory attitudes towards risk, a new body has been established by the RSA to examine the issue. The Royal Society for the encouragement of Arts, Manufactures and Commerce has established the RSA Risk Commission under the chairmanship of Sir Paul Judge. The commission will look at risk and its “contextualisation” in five key areas: childhood, transport, engineering, medicine and security. It will hold conferences and publish reports over the course of the next three years with a view to commenting on emerging risk issues and seeking to influence public policy and opinion.
As FDs increasingly take on roles involving the management of business risk rather than simply its minimisation, the work of the commission may well be of interest. The RSA came to prominence in the business community in the 1990s with its influential ‘Tomorrow’s Company’ initiative, which brought business leaders together to re-examine the sources of sustainable business success.
The right balance
A speech last year by Sir Paul Judge provided a suitable backdrop for the setting up of the Risk Commission. In it, Judge said that many people had “a distorted sense of personal risk”, which was having “a damaging effect on the government of our society and on our personal attitudes to risk and enterprise”.
To make his point, Judge listed a number of statistical probabilities for different incidents:
- Chance of any one person dying in the next year: about 1%;
- Chance of tossing a coin six times and it comes up heads each time: slightly more than that;
- Proportion of UK deaths caused by ‘internal medical’ problems – ie, disease: 96.9%;
- Chance of dying in the next year from external causes: 0.03% (1% x 3.1%) – ie, one in 3,000;
- Chance of dying on the railways in 2003: one in 10 million;
- Chance of dying while travelling by air: one in 1 million;
- Likelihood of a child being run over in any year: about one in 250,000;
- Chance of dying in a year while climbing steps and stairs: about one in 75,000;
- Chance of dying from accidental poisoning: about one in 64,000;
- Chance of dying in a car: one in 40,000;
- Chance of dying on a motorcycle: one in 2,500 – or 4,000 times more likely than dying on a train.
“This analysis shows that humans are not particularly good at estimating risk,” said Judge. “Research shows that we have a tendency to underestimate risk over which we have some control, and to overrate risk over which we have no control.
“Public policy has to balance the national statistics with the personal tragedy of loss of life or of injury and apply the available resources in the best way possible. This is, however, increasingly difficult with the distortion of public understanding of risk,” he said. “It is clear that something is seriously wrong when teachers feel unable to take children on school trips for fear of being sued. The Financial Services Authority, whose origins go back to Robert Maxwell’s activities, is now seen as hugely inhibiting efficient business by perfectly respectable companies, but failing to stop any real criminals. The railways are investing £20m to prevent each likely rail death whereas there are many more cost-effective road safety schemes that are unfunded. The Dangerous Dogs Act and the Handgun Act were both classic examples of when politicians said ‘something must be done’.
“Every decision that we make from the most trivial to the most important is attended by some sort of evaluation of the costs and the benefits, and the likelihood of a successful outcome. To accept any risk is to accept a possible loss. Risk-taking is inherently failure-prone. Otherwise, it would be called ‘sure-thing-taking’.”
Judge then asked, why do we take risks? “The key reason,” he suggested, “is to expand our level of experience. While there is an increased chance of there being a problem, there is also a probability of finding something new and innovative. Risk-taking increases the probability that one will find something of value despite the search cost. Over the course of human history, every major advance has occurred because of the temerity on the part of human beings in trying to understand more and to do something that has not been tried. An understanding of risk is vital if our population is to remain enterprising in both business and other walks of life.”
To learn more about the RSA Risk Commission or to find out about contributing to its work, see http://www.theRSA.org or email sandra.wint@rsa.org.uk
