How Can Knowledge Of Risk Management Help In Making Career Decisions
Learning about risk management and acquiring knowledge about its principles can help develop a permanent risk mindset, making sure young individuals are well on their way to becoming risk literate
Every day, thousands of young people make choices about their careers, hopes and dreams that will not only shape their future but also impact the world at large. However, in today’s highly competitive job market and economic landscape, career decisions can be challenging. So how can we aid youth to make better decisions? And what is the role that risk management can play in this landscape?
The ABCs of Risk Management and Risk Literacy
In essence, risk management is defined as the process of identifying, assessing and controlling risks for an organisation or company that may emanate from a variety of sources such as: financial complications, natural disasters, legal liabilities, accidents etc. And while this definition is still widely understood and considered to be the foundation of the risk landscape, the scope of risk management is being further widened to include Enterprise Risk Management (ERM). While traditional risk management focuses on financial and insurance risk alone, ERM is an integrated and joined-up approach to managing risk across an organisation and its extended networks. Therefore, ERM is defined as the process which aims to help organisations understand, evaluate and take action on all their risks with a view to increasing the probability of success and reducing the likelihood of failure.
While both these above definitions may portray risk management as something that is exclusive to businesses alone, risk management has more to do with our everyday life than we know it because, at the end of the day, risk is inherent in everything we do. In an increasingly uncertain global world order that is characterised by acronyms such as VUCA (volatility, uncertainty, complexity and ambiguity) and RUPT (rapid, unpredictable, paradoxical and tangled). Therefore, being literate about risk and how it permeates through all spheres of society is extremely important. It is no wonder that renowned German psychologist and risk expert, Gerd Gigerenzer described risk literacy as 'the cement of society'. His words could not be truer, especially for young people who are making important decisions about their careers.
Below are a few key risk management skills that can aid students in their professional journey.
Analyse and evaluate: Over the past two years there have been radical changes in the world of work, with trends such as moonlighting, quiet quitting and the great resignation handing more power to employees. However, looming fears over a global recession are now threatening some of these changes that swung in favour of employees. Amidst such an environment, young people would be wise to borrow a leaf from the risk management playbook and work to analyse and evaluate the risk of staying at their current companies or doing a cost-benefit analysis of moving jobs. Whether it is basic decisions about which organisation to choose for a first-time job or narrowing down career fields, basic risk management can help weigh the pros and cons of each decision in a methodical and clinical manner, helping young people to make better and more informed decisions.
Contingency planning: A contingency plan is designed to deal with eminent or unexpected future events and is a cornerstone rule in risk management. For instance, what happens if a bold career move may not pay off and a young person in the initial stages of their career is laid off? Such an event leads to the risk of being unemployed temporarily. A contingency plan is a roadmap to help navigate such a scenario. It can help with advance planning and the creation of instruments such as savings funds for emergencies, backup income streams and much more to help during tough times.
Risk literate mindset: In the long run, learning about risk management and acquiring knowledge about its principles can help develop a permanent risk mindset, making sure young individuals are well on their way to becoming risk literate. This can help them to be in a better position to identify, strategise and deal with risk in an informed manner throughout their professional lives. In fact, as per the latest research, nearly 40 per cent of the skills deemed as important by the World Economic Forum’s Future of Jobs 2020 report come under the ambit of risk management. This further highlights just how important risk-related skills will be in the future.
The last few years have been a roller coaster ride not just for companies but for individuals and society at large. Whether it is geopolitics-linked inflation, climate change, cyber-attacks or frauds and crimes, risk is now a part of all our lives. Thus, society at large and individuals, especially young people starting out in their professional journeys, need to learn how to take risks to grow and develop. From energy to infrastructure, supply chains to airport security, hospitals to housing, effectively managed risks will help individuals achieve their career objectives and vision. In a fast-paced world, the risks we must manage are evolving quickly with many interconnected events consolidating and creating catastrophic impact on individuals, organisations and economies. Thus, we need to make sure we manage risks so that we minimise their threats and maximise their potential.
Risk intelligence or Enterprise Risk Management is, thus, no longer a good to have but a must-have skill and knowledge for youngsters to make better decisions in their personal and professional life.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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