Home > Property & Casualty > Lessons from last week’s doomsday predictions about risk

Lessons from last week’s doomsday predictions about risk

The May 21st predictions of the end of the world as we know it have proved wrong. Harold Camping and his followers, despite their most confident and infallible prediction (according to them) have been proven wrong. And while I don’t want to give any credence to Mr. Camping and his predictions (nor do I wish to belittle his faith either), there is some value for a risk professional in the sad reality of the wild and seemingly impossible predictions from these doomsday believers.

Risk management is built around the premise that adverse events need to be considered, planned for and that actions need to be taken in order to mitigate the negative impact these events. These actions can be both proactive and reactive in nature. However, these actions are all based on the assumptions about the nature of risk that each organization faces. That makes the practice of risk management predictive by nature and with some consideration of the future. And with these considerations come the inevitable thoughts of the doomsday scenario that will “end the world” as each organization knows it. And all to often these claims are dismissed out of hand. This might make good sense with folks like Mr. Camping, but that is not wise for those involved with risk management and financing.

There is very little that can be done do prepare for the end of time scenario. In that case, the best laid plans of mice and men will not amount to a hill of beans. But for the risk manager and their organization, they do not have the “luxury” of the end of the world. The Triangle Shirtwaist Factory fire of 1911 is often cited as the beginning of the labor safety movement. Until that time, concerns for industry safety standards were dismissed as too costly and unnecessary. As time has since proven, however, these dismissals were inaccurate and wrong.

I will not attempt to defend the predictions and unusual history of those who insist on claiming to know of the timing of the end of the world. But I would argue that there is a very real place for the less than ideal science of risk management predictions and “risk mapping”. Too often risk management is only seen as an expense and a commodity. This leads to a less than thoughtful evaluation of issues of risk and its potentially devastating impact on an organization, company or its people. Additionally, minor losses with little cost impact do lead to some organizations to think that they are immune severe economic losses, insured or otherwise. I believe this is a significant mistake.

So while many will take great pleasure in mocking and maligning doomsday prognosticators, I hope that those of us engaged in the profession of risk management will take a moment and realize the lessens and more realistic impact of our “doomsday” work. It is critical to the growth and protection of our industries, our economy and , most importantly, the people we serve. We do not have the luxury of being wrong and we are not whisked away from having to deal with the unpleasant outcome of what is left.

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