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Better Risk Communication

May 11, 2011
Better Risk Communication

Consider two scenarios:

Company A is a medical device maker that just released a new pacemaker. Its datasheet states that the device could fail once every 90 years.

Its competitor, Company B, released its latest version a week before. In its datasheet, it noted that the device is guaranteed to function properly, under approved procedures, for 15 years, before it begins to experience reliability problems, due to aging and other factors.

In these two fictitious scenarios, Company B does better in communicating the risk of its product. It has provided certainty, through a concrete number, that can enable better decision making on the expected performance of the products. Both communicated risks associated with their products, but Company A did not do much. To some, it could look like a better option because of the illusion of the stated one failure per 90 years. Yet, there is nothing that stated that the device cannot fail the next day, after installation.

Vague risk communication happens when a product is not thoroughly tested or when the constructs of the risk model is not sufficiently broad. It eliminates the worst case scenarios and relies largely on favorable risk scenarios. In engineering, it usually leads to fatalities and recalls, because in the real world, the worst case does happen.

For mission critical systems deployed in nuclear, aerospace, and medical device industries, how we communicate and understand risk could make a lot of difference on planning. In a world where companies are aggressively selling to customers, sometimes, we fail to present risks in actionable ways.

In 2003, the Nuclear Safety Commission of Japan explained that the chance of a radiation related fatality in a Japanese nuclear plant is one per one million years. When you know that something has a chance of happening once a year in a million years, you will get an elusive feeling of safety. Competition is very intense and it may not be in a business’s interest to develop mitigation plans for something that occurs that rarely. As expected, the document did not raise any unusual level of urgency because a million years is far away. But we know from the Fukushima nuclear plant that the one chance came within eight years. That many events escalated the problem was a nonissue; it showed that concurrent occurrences of the earthquake and tsunami were not modeled.

Accidents happen and organizations expose themselves to losses and reputational risks because of the ways they communicate the risks associated with their products and services. From engineering to finance, if risks are communicated very well, lesser accidents and crises will happen, simply on the strength that people will plan better. When risk communication fails, people become vulnerable.



This article is about RISK MANAGEMENT
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