If you're anywhere on the East Coast, over the past 24 hours you have likely witnessed several key mistakes companies often make when preparing for potential risk without even realizing it. As it turns out, the latest "Polar Vortex" and the resulting snow it has produced has served as a microcosm of business planning, and the mistakes are the same in both. How? How about an illustrated guide!

Using low probability and historical results to dismiss concerns. 

If your headquarters are situated in a "500-year" flood plain, and it last flooded 125 years ago, you might think you've got 375 good years to go and shouldn't factor flooding into your risk plan. Same with historical results - if your offshore manufacturing is centered on an island in the Ring of Fire with a volcano that spits some smoke & ash every few decades, it's easy to ignore that in your risk plan. 

You're seeing this right now in cities that are completely unprepared for the snowfall amounts that they've received. In cases like Philly, where Source One is located, predictions for snow ranged from 5-10". Five inches of snow is navigable, but 10 means untreated roads get locked up fast. Over the past three years, weather services have historically overstated expected snowfalls enough that public works departments ignored the risk, resulting in untreated roads and city workers playing catch-up.

Regardless of if you're trying to plan around the next Krakatoa or keep drivers out of snowbanks, downplaying the potential impacts of a low-percentage event or relying on history to predict the future is bad practice, and a mistake you shouldn't be making.

Not planning adequately

In most cases, an ineffective plan is just as bad as not planning at all. Back to our previous example, if your plan to avoid potential slowdowns from volcanic activity is to build redundancy with a manufacturer located on another nearby island, volcanic activity large enough to disrupt your primary supply stream will more than likely negatively impact the entire region (see the Eyjafjallajökull eruption's disruption of European travel in 2010).

This applies to areas that may have planned to treat the roads, but didn't book crews to plow or react to wind damages. 

In both instances, plans were made and steps were taken in response to a perceived risk, but the steps were not adequate, and were ineffective in mitigating the risk.

Not using the available resources

All the planning in the world won't do you a bit of good if the plan isn't implemented, or is implemented incorrectly. Whether its a risk plan that doesn't get stakeholder buy-in, or serious issues pop up during implementation that delay or minimize the plan's intended effects, or the people in charge of implementation simply fail at their job, the failure to implement a policy that will avoid or mitigate risk increases loss. Not only is productivity lost due to the risk event, but all the time, resources, and effort put into the planning stages is now a wash because the plan did not have the proper effect. 

This is akin to the new, safety-enhanced cars you'll see sliding across three lanes of traffic in icy conditions. The all-terrain tires, the all-wheel-drive, and stability controls mean nothing if the vehicle isn't operated correctly.

Besides the obvious "no one knows what to do when it's snowing", the key takeaways are:

  1. When planning for risk events, plan to mitigate the effects and impact of the events. Don't plan around likelihoods.
  2. Plan robustly. Know the full impact of the risk event and be sure you have all corners of it covered.
  3. Make sure the implementation procedure for the risk planning is as robust and locked-in as the risk plan itself. 
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Nicholas Hamner

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