Risk Exposure Formula & What It Can Teach Us
Risk = Likelihood of Failure x Cost of Failure
The Risk Exposure Formula makes a lot of sense when you look it.
Risk = Likelihood of Failure x Cost of Failure
But I believe it has an important lesson to teach that is not always the first thing that jumps as us.
I still remember when I first noticed learned it. It was similar to checking the images that contain other images. At first it’s not easy to notice the pattern, but once you see the other image, it becomes hard not to see it.
It is about how we approach risk.
It is about our biases that make us approach any formula of this type with the same aversion.
We first think about minimizing the likelihood of failure and keep pushing that side of the formula. We do that individually. We do that as organizations.
Here’s an other one of the same kind:
Increasing Performance = Decrease Errors and/or Increase Insight
All organizations focus on decreasing errors.
It is built in us. We all have built-in Loss Aversion tuned over millions of years of evolution.
Going back to Risk Exposure, instead of swarming around trying to decrease the Likelihood of Failure to near zero, well past the point of diminishing returns, it can be much more effective to make failures cheap.
Thank you for reading.
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