Risk management is luck management

9 January 2016

reading time:  minutes

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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luck, risk management

About the author 

Sonnie Bailey

Sonnie provides financial planning services via his business, Fairhaven Wealth (www.fairhavenwealth.co.nz). Fairhaven Wealth provides independent, advice-only, fixed-fee financial planning services. Sonnie is also a “recovering lawyer”: he has specialised in financial services, trusts, and estate planning.

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