Jun
11

Risk Management

By

Ok guys, I guess I’m just going to be on a risk management kick for a bit because I am writing about it again. Let me set the stage. I live on beautiful Lake Travis in Austin, Texas and the lake is about 67 miles long and 200 feet deep in some areas when the water is up. It is a man-made lake but it is still patrolled by the lake police heavily. Additionally, there is no bridge over this lake, ferry, and very few shuttles. So most of the time you have to take your own private boat to the other side or drive an hour and a half. 

There are plenty of small business men here and many of them attempt to capitalize on the lack of water taxies. So there I was, sitting at my local bar and grill staring at the lower Colorado river that makes up Lake Travis when I saw the latest person to fall victim to the laws of Risk Management. He had 60 people to shuttle from one side of the lake to the other. Now that is a lot of people, but it wasn’t that far of a trip. It may be a half mile. The boat never even gets out of sight. So this man that wanted to start his own shuttle service on a major holiday weekend takes to the lake with his first passengers. Only, he had not prepared or given thought to risk. 

This sets the stage. Choppy water, inexperience, no planning and power tools! He loads up his first customers and heads for the open water. It’s a busy lake. It’s huge. It’s a holiday weekend and he is in an 18 foot ski boat with eight people! It doesn’t take long before he encounters his first wake and then his second. Normally this isn’t a problem, boats are made for water but these wakes came into a boat with too many people on it and the boat’s pump for pumping out the water was not working. You can see this coming can’t you? He begins to sink with passengers. Can you say Titanic? 

Now, we are all beginning to see risk management here but let’s bring it in to bright light. This man stands to make $300 and he hasn’t even delivered the first 8 people of 60 and is about to lose his capital equipment; his boat. However, it gets worse. A lake policeman notices a boat in distress and decides to help only to realize not only is the boat not in working order, it has too many people on it and not enough life preservers. The ticket book comes out. 

Over the next 45 minutes, the officer writes a series of tickets costing several hundred dollars while the captain bails out the boat and the passengers are hostage. Keep in mind there are approximately 52 other passengers on the other side of the lake watching this and they all have an event to get to. They decide to drive. That is everyone, but the people captive on a sinking boat. 

This man after being beat up by the waves and the local lake police drops off his passengers and limps home bailing out the boat the whole way. He has now lost his $300 job for the day, has repairs to do on his boat, has several hundred dollars of fines to pay, and has showed his professional skills in front of the whole community almost guaranteeing he will not get another job. So, what is the cost for lack of risk management planning? 

As this small little tale shows risk management, even at the smallest of levels, is important in every business but most people and companies throw caution to the wind from lack of experience. It is safe to say that this man’s startup company is dead from just one incident of not thinking of risk. This is not where you want to be. Small to medium business controls the US economy, not large corporations. If the companies of the USA do not learn risk management, including small companies, our business community and society at large is at risk. Learn this key skill. Don’t be the man in this story. He still has a potential law suit to look forward to for placing his passengers in danger from neglect. Risk management is a very real part of business. Learn it. 

Your path to business success.

Categories : Business Skills

Comments

  1. Project risk tolerance comes from two sources, corporate culture and the type of project. Risk tolerance is accounted for if the project began with RiskAoA . However, if the project begins without its normalization, the type of project necessitates an understanding and possibly metrics for risk tolerance. For example, a research and development project has more risk thana software project, which has different risk then a new product launch.

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