Thought Experiment on Risk Management

On today’s show we are going through a thought experiment about the risk of large global divisions and how that might affect your real estate development project.

To walk through the process, we are going to use an example of a small construction project for a single family home. The home is already under construction and the foundation has been poured and the wood framing is 80% complete. The project has been started and like all construction projects, once it is started it must complete.

Any discussion of risk requires a more detailed analysis of the elements of risk. Let’s start with a definition of risk.

A risk is anything that is not in your plan. In this context it is fair to say that most businesses have not taken into account the risk of China becoming fully isolated from the western world. Europe and the US would certainly face severe product shortages if that were to happen. When we talk about risk we need to break it down further. Risk gets broken down into likelihood and impact.

We know from history that people are notorious poor at assessing whether a risk is likely to come true or not. So we are not going to even try to assess the likelihood.

What we can quantify is the impact.

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Host: Victor Menasce

email: podcast@victorjm.com