Risk management is luck management

Managing risk is about managing uncertainty, and its effect on the things that are important to us.

Most commonly, we think about managing risk in terms of stopping bad things from happening, or at least reducing the likelihood of bad things, or their impact should they occur.

If you define risk management in terms of "the effect of uncertainty on objectives", then the reverse is also true. Managing "risk" by this definition is also about exposing ourselves to the upside - making good things more likely to happen, and ensuring we capitalise on them when they happen.

Let me put it another way.

One way of thinking about uncertainty is to think in terms of luck.

In an uncertain world, where we can't know or fully predict the future, many different things can happen to us, deserved or not. Many important things happen by chance. Especially when the stakes are high, we often think of chance events in terms of luck. "It was a stroke of luck." "I was in the right place at the right time." "We were unlucky."

Are there ways to be luckier? (In the "good luck" sense?) 

And are there ways to be less unlucky in life? (In the "bad luck" sense?)

There are. And in fact, we have a lens and discipline for thinking about this. It's risk management. 

Improving your luck is about exposing yourself to the possibility of good luck, and its impact when it happens. And it's about reducing the likelihood of bad luck, and its impact should it occur. 

There may be some distinctions between "risk" and "luck". For example, thinking in terms of luck has stronger connotations related to the upside, which is the reverse of when we think about risk. But in a fundamental sense, when we're talking about luck or we're talking about risk, we're talking about the same thing: the impact of uncertainty on our lives.

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Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.