6-11-10 An Oily BP Mess

I suspect that you might have noticed that I have not written anything about the ongoing oil spill in the Gulf. Why? Perhaps because every time I watch the stories about the results of the blowout, I am just heartsick by the damage that it is doing to the Gulf. And, like most normal mortals, I’ve been practicing my finely honed head-in-the-sand routine. I can’t fix it, so I ignore it. Not a good management skill, but one that we all have (and, on occasion, use).

So now that I’ve sufficiently prodded myself, I do have a few things to say about the disaster -- at least in a larger context.

In the past, I’ve talked about disaster preparedness (3-29-10 Tornado! and 3-1-10 Earthquakes and Such), risk tolerance (4-14-10 What's Your Tolerance Level?), and safety (2-26-10 Are Safety and Growth Mutually Exclusive?). But today, I thought that I would approach it from a different perspective.

Someone asked me an interesting question once --- one that I believe applies here. “Are you so busy eliminating risk that you forgot to manage it?” As you might imagine, in the aerospace industry we take the elimination of risk seriously. Each of us in the industry takes it personally when a plane falls out of the sky -- whether or not it was one that we built. We are a risk adverse lot and go to great lengths to eliminate it. So what is the fundamental flaw in this? The original question answers that. Huh?

Well, the sad truth is that, no matter the industry, we can’t eliminate all risk. It would be like wrapping your kid in bubble wrap, all kinds of protective sports pads, a helmet, hockey gloves, racquetball goggles, shin guards, etc. and then sending him/her out to play in a war zone. You didn’t eliminate the risk. You can’t stop the war. But you could manage the risk by keeping your child at home. Okay, not the best analogy for the parents out there, but you get my point.

I am naïve or trusting enough to believe that BP spent so much time trying the eliminate the risk associated with deep water drilling that they forgot to manage it. Why? Because part of managing risk is putting contingency plans in place. Given the response by BP (and the government), I don’t see any evidence of contingency plans. Seems to me that all involved are making recovery plans up on the fly. Now don’t get me wrong, the ability to operate on the fly is also important. But it is a helluva lot easier to do when you at least have some rudimentary backup or “what if” plans in place.

As an executive, you are right to want to eliminate risk. But at some point, you will have to acknowledge that you cannot eliminate all the risk. You have to stop and define the remaining risk and then you absolutely must put plans in place. Call them contingeny plans, what if plans, risk management plans -- call them what you want. Just make sure that you have the ability to manage risk.

Cheers!