Think Differently

Risk as a Threat to Value

Risk is conventionally defined as the probability of harm occurring as a result of some process or action. But this framing of risk runs out of steam rapidly when an enterprise faces risks that are not easily quantifiable, or are not associated with clear causative links. And too often, risks that aren’t addressable within this framework are simply pushed to one side, or overlooked.

However, there is an alternative way to think about risk that complements this more conventional approach, and is at the heart of risk innovation thinking. And this is to approach risk as a threat to value.

Value denotes something that can have more or less worth. This retains the idea of risk being about tangible forms of value like health, a sustainable environment, and financial profitability. But it also allows us to think about risk in terms of less common but sometimes more impactful forms of value. These might include deeply held beliefs, respect from others, the ability to live a full and free life, happiness, even aspirational value—value that has yet to be achieved, but is nevertheless important. Whether tangible or intangible, a current product or a future success, if it is worth something to you or your stakeholders, it’s an area of value.

For anyone engaged in the process of innovation, this way of thinking about risk -anything that threatens value- is as important as it is transformative. All too often, it’s the less tangible aspects of risk, or orphan risks, that are brushed aside that cause the greatest problems.

© 2019 Arizona Board of Regents on behalf of Arizona State University

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