Risk identification and risk management begin with the facts of the case but when it comes to deciding what the client should actually do, the answer is rarely as straightforward.

We may assess a situation and propose what appears to be the right solution, only to discover that the client sees things differently. Budget constraints may make a necessary investment unrealistic. A client may simply disagree with our interpretation of the risk. And sometimes, circumstances leave no room for the textbook solution. That is when risk management becomes less about finding the perfect solution and more about finding the right solution for the situation at hand.

A charming anecdote about the late King Olav V of Norway illustrates the point. Despite his advanced age, the King insisted on driving himself. His chauffeur was required to sit in the back seat, while his bodyguard took the front passenger seat. The King would occasionally fall asleep while waiting at traffic lights. When the light turned green, the chauffeur would lean forward, gently tap the King on the shoulder, and say:

“Your Majesty, the light is green now.”

The story is amusing, but it also captures an important principle of risk management: sometimes the ideal solution is simply not possible to push for. Good risk management therefore requires us to look beyond the risk and the preferred solution and consider the bigger picture. It may mean adapting our recommendation in cooperation with the client, accepting certain shortcomings, or even devising an unconventional approach.

The goal is not always to implement the optimal solution. Sometimes, it is to implement the best possible solution at that particular moment. One that may not be perfect, but is ultimately far better than having no solution at all.

By Lars-Åke Severin, CEO PSU