‘Cart before the horse’ is a figure of speech meaning doing things the wrong way around or with the wrong emphasis. The idiom is about confusing cause and effect, and this is what ISO does when it refers to risk and opportunity rather than opportunity and risk. Apart from potential catastrophes, organisations incur risk because of the pursuit and exploitation of opportunity. Just as we talk about horse and cart, we should be talking about opportunity and risk indicating that management is principally about exploiting ‘opportunity’ with ‘risk’ as a subordinate issue.
Organisations are created, nurtured and maintained to fulfil a purpose supplying value to customers via goods and/or services. The key component of any business plan is to demonstrate how the organisation will be able to do this viably by exploiting potential opportunities to create value. Its ability to do this depends on the intelligence and creativity of the organisation. An effective business plan will also demonstrate how it will address the avoidance or control of risks arising from the organisation’s creation or its endeavours to exploit one or more opportunities in achieving its objectives.
Risks are a consequence of opportunities and not the other way around. Some people may be uncomfortable with this assertion especially if their role in an organisation is to focus only on managing an aspect of risk. However, it is what each of us naturally does soon after we are born. We traverse the spectrum of positive and negative human emotion as we experience the upsides and downsides to life i.e. situations and things that are pleasurable and unpleasant. As we continue to explore, learn and become more skilful, we become naturally motivated to maximise the potential for gain (pleasure, happiness et cetera) while minimising the potential for loss (displeasure, harm, pain et cetera). Our prime motivator is gain and not loss although we can be demotivated if the potential for loss is significant.
Organisations are simply superorganisms, and like people, we have to initially determine the potential opportunities, then assess the associated prospect(s) and risk(s) for each opportunity before deciding which opportunity to accept. E.g. when taking a holiday, what opportunities are open to us and what are the associated benefits and risks? Our prime motivation is to seek holidays that give us pleasure and only then consider ways that a holiday could go wrong. When contemplating starting or operating a business we have to start by determining the opportunities and then follow by assessing the associated potential prospects and risks. Before accepting any opportunity the stakeholders need to be satisfied that the potential gain (upside) sufficiently outweighs any potential loss (the downside) and any potential loss is not unacceptable to an individual stakeholder.
Balancing prospect and risk is addressed in the IMSIG blog Integrated Management of Prospect and Risk.
in addition to intelligence and creativity, effective and efficient management critically depends on the way that we define concepts and order our individual and collective thinking. Thinking about opportunity and risk rather than risk and opportunity is just one of many examples of the importance of always putting the horse before the cart. As it happens it is something that we all naturally tend to do with varying degrees of proficiency but in managing organisations, it has to be orchestrated. MSS 1000 contains a full set of unified management definitions, in contrast to ISO standards, enabling precise communication and better comprehension of integrated management.