MBA Geek

We’ve all seen the disastrous consequences of the earthquake in Haiti and it’s nice seeing the response of individuals and communities doing their part and contributing donations and funds to the victims. The corporate world has also been chipping in and we’ve seen donations by Coca Cola and Bank of America of $1 million apiece. Donations by UPS, Walmart and other organisations are also contributing to this pile.

Of course, it’s easy for the corporate world to appreciate the hardship natural disaster can cause. You only need to talk to owners of New Orleans hotels french quarter to get a feel of how helpless once can feel in these circumstances. Business is all about understanding what risks you are exposed to, but sometimes something comes out of left-field that you would never expect.

What’s the worst thing that can happen to your business? Well, for some organisations, the loss of data can be critical. If strategic information gets into the hands of your competitors, it could spell a fatal blow for your business. And if you have consultants in the field, you can be particularly exposed to this risk.

So, how do you mitigate against this? Well, there are a number of companies that deal in computer protection like Alertsec who produce a full disk encryption package that locks a computer’s hard disk and prevents access to it unless the correct password is supplied. What this means is that if a laptop gets lost or stolen, your data will remain protected, away from prying eyes.

It’s one way to deal with unavoidable risk; if you can mitigate it, you can reduce the potential damage that can occur.

Interesting post on Seth Godin‘s blog entitled Apparent Risk and Actual Risk which talks about how people can perceive situations as being more risky than they actually are, and sometimes end up choosing to go down more risky paths just because of this perception.

So, what drives this perception. I put it down to two different factors. First of all, it’s easy to overlook certain factors when performing your personal “risk evaluation”. Assumptions and ignorance are the worst two factors here and can lead to a shortfall in evaluation. The other problem is jumping on the bandwagon and accepting “common knowledge”. It’s amazing how many misconceptions make their way to the mainstream; one of my favourites is that celery is a natural fat burner because it consumes more calories to digest than it contains.

Anyway, morale of the story. Next time you think about a “risky” decision, look at if from a different angle and check whether it’s really risky.

Twitter is ablaze at the moment with people trying to figure out what’s up (or down) with Gmail, what work and what doesn’t and how long it’s going to remain the way. Outages happen, but when you store your entire email history somewhere out on the Internet and suddenly you can’t get access to them; well, people start talking.

The whole problem with this is people start to doubt the effectiveness of Cloud Services. it gets even worse in the corporate space where people need to run their businesses off these systems. And I’m not talking a small outfit trying to perfect the newest diet supplement coming to market; I’m talking about large multinationals who depend on the technology to keep their organisation ticking. Moving towards Cloud Services increases risk and if those risks are managed all can be fine. But an incident like this brings home the impact of a risk you cannot manage.

It’s interesting to note how many academic subjects end up being used in practical applications without most people being aware of what they’re actually doing. For example, you can look at subjects like mechanical engineering for example; where people who drive cars have no idea what’s going on beneath the bonnet.

Another similar subject, is finance, particularly in the world of insurance. Insurance is really all about managing some sort of risk. The formal disciple, called risk management, has evolved into a practice where organisations recognise and measure the level of risk they are exposing themselves to, and put in place plans for avoiding, mitigating or absorbing that risk. But this also effects each and every one of us in a simple form. I’m thinking about taking out a car or bike insurance policy. What this does is pass on the risk of some unforeseen event from yourself to the insurance company who has the financial backing to be able to deal with that sort of eventuality. The insurance company collects premiums from people who want to be covered and uses these to foot any claims that may arise. Premiums are calculated by measuring the risk that your policy covers, which is really a function of the likelihood and the financial cost of one of a set of events happening.

It’s quite fascinating to see the different flavours of insurance available to people. I was looking through the FAQ page on the Autonet Insurance website just to get an idea of what is available. They claim to be the country’s largest independently owned insurance brokers and have a huge selection of different insurance policies on offer (including quad-bikes which is cool). Must bookmark them for future reference.