As Mike Myatt said; “As much as you may wish it wasn’t so, as a CEO you’re really only as good as your last decision” [1] Yes! The stakeholders can be very merciless in todays’ bloody “red sea” [2] and therefore a CEO can be. Because companies consist of people, they grow as much as the decisions and actions of that people. So, “why companies fail at risk management?” question might be nested with “why a person fails at risk management?” question or may be the right question is the second one.
The available resources always limited and whether a company or person prefers to do one which that means not doing the other one. If the choice is right, it makes the company growing, on the other hand, sometimes a company may fail because of the direct costs of a single “bad” choice or the “opportunity cost” [3] of the second one.
So, the next question might be “Who makes the decisions?” It may be stakeholders (not the project stakeholders) or CEO or group of smart people, in other words, the collective intelligence. But sometimes for some reasons our eyes cannot see the “devil”. City of Troy lost the Trojan War because of one man’s decision that was getting Trojan horse inside. One man’s single decision had set the end of the war. Besides, he was not a king or warrior. Maybe the connected couple of bad decisions led to way for the last decision and whether the first or last one, the domino effect was inevitable.
I should be mentioning the known risk management terms which I don’t found them useful, for example; Risk identification term refers to identify, characterize and assess threats. So, how a company which consist of most of the smartest people in the world identifies the threats? They may not see most of the exceptional cases and this is the reason why we backup our data even if we install most expensive security software of the planet. The weirdest thing was that the most of the well-known insurance companies were failed on latest economic crisis. So, can we identify the risks just because there are standards and well-defined terms? No.
As a result, a company or a person might fail for any reason. Unless they put all their eggs in one basket, there will be a recovery point.
“The only man who never makes a mistake is the man who never does anything.” – Theodore Roosevelt
References
[1] Mike Myatt (2010) How to make great leadership decisions (online) Available from: http://www.n2growth.com/blog/why-businesses-fail/
[2] Sun Paper: Building Competitive Differentiation International Paper Group (Online) Available from: http://www.articlesbase.com/strategic-planning-articles/sun-paper-building-competitive-differentiation-international-paper-group-3507953.html
Wikipedia, Opportunity cost (online) Available from: http://en.wikipedia.org/wiki/Opportunity_cost
