Risk Management and Business Instinct

Risk management professionals continually seek new methods and processes to improve their outcomes. They typically have a preference for empirical tools, which are grounded in objective data and quantitative analysis, as a way to reduce uncertainty and subjectivity in risk management. The appeal of these tools lies in their ability to provide concrete, measurable, repeatable outcomes that can be subject to scrutiny.

However, we should not ignore business instinct, which is a concept recognized by psychologists. Business instinct refers to an intuitive understanding of the business environment, cultivated through prolonged industry experience. It encompasses deep, often unarticulated insights that can be used to inform strategic decisions. This intuitive grasp of the business landscape enables people to anticipate and respond to situations in ways that purely empirical methods may not match. Many good decisions have been made by those who "trusted their gut."

Relying solely on business instinct, however, can be problematic. Instinct is inherently subjective and can be influenced by personal bias and experience, potentially leading to skewed risk assessments. To counteract this, a balanced integration with empirical methods is crucial. By combining the empirical rigor of analytical processes with the nuanced insights of business instinct, risk managers can create strategies that are both grounded in reality and attuned to the subtleties of the business environment. 

Risk Register by ProjectBalm is a cost-effective tool that helps you record and manage your risks.