The Relevance of Risk - A Management Perspective

Organization: The Australasian Institute of Mining and Metallurgy
Pages: 4
Publication Date: Jan 1, 1994
In 1989 Henry Fairlie wrote a cover story for The New York Republic, 'Fear of Living'. He noted, `The first Apollo space craft caught fire during a test on the launch pad. Three astronauts were killed, the nation was shocked and horrified, all the more because the screams and scrambles of the astronauts could be clearly heard'. After a brief delay in manned flights, the Apollo program resumed with strong public support; within 18 months, Apollo 11 landed on the moon. Fairlie contrasts the Apollo tragedy to the 1986 Challenger disaster. `The prevailing mood in America so panicked NASA that it took almost three years to send up another shuttle', he observed. `In 19 years between these tragedies, the idea that our individual lives and the nation's life can and should be risk-free has grown to be an obsession threatening to create an unbuoyant and uninventive society.' Taking risks is a normal part of our daily routine. The act of living involves minute-by-minute decision-making focused on survival through the practical management of risks. The act of breathing exposes each individual to the risk of infection while the act of crossing the road could almost be considered suicidal. We deal with these constant threats by observing simple rules of hygiene, safety or what may be labelled as common sense. The rules of community, designed to minimise risk in society, can at times lose focus and result in the imposition of schemes that have a far greater cost than the issues from which they protect. Effective management of risk, whether in the community or a business is about awareness and balance and the elimination of unacceptable risk. Risk cannot be eliminated from our lives or our working environment. However it can be managed if it is properly understood, monitored and controlled. The purpose of my presentation today is not to provide a comprehensive technical risk inventory but to capture the essence of risk and the application of management strategies designed to deal with it in a positive fashion. The basis of our differential financial reward system is risk. The key to successful management is to deal with the downside risks in such a fashion that the benefits of enterprise are not eliminated. The key question any investor must consider is `can the major risks assQciated with a venture be managed or eliminated while retaining a greater proportion of upside potential'. The answer to this question is the ultimate value an investor would assign to any project. In reviewing the relevance of risk to our industry the range of papers to be presented today provide examples of how management deals with specific components of risk. In each case the value of the business has been enhanced by the practical application of balanced risk management. The ultimate success of the industry depends very much on this concept as it also provides a public showcase upon which we are judged. Therefore, from all perspectives the effective management of risk is a cornerstone from which to build a stable and progressive mining industry.
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