Risk Management in Today’s “Risk Society”: Thoughts on Modern Day Risk Management From Michael Durland

Although 2008 and 2009 were fraught with a financial crisis that would force Michael Durland to challenge the boundaries of his comfort zone as the CEO of Global Banking and Markets at Scotiabank, during his talk on August 10^th, presented by the Centre for Social Impact, Durland recounted how he remembers those years as being two of the most important years of his career because of the tremendous amount of learning he engaged in. Throughout his earlier studies (BCOMM from Saint Mary’s University and PhD from Queen’s University) and his career, Durland had become very familiar with the industrial society’s traditional concept of risk, its connection to the “illusion” of control, and risk management tools’ ability to now clearly assign responsibility to outcomes. However, it was his responsibility to hold a leadership position in one of the most dire financial crises the world has seen since the Great Depression that prompted Durland to start thinking more about how we conceive, determine, assign, and communicate “risk” in today’s fast-paced, complex society. He saw first-hand the failure of risk management and the limitations of our traditional, quantitative risk management tools. 

After 23 years at Scotiabank, Durland decided to retire in 2016 to pursue an array of business, academic, and philanthropic interests. Durland is a member of many advisory boards, including the boards of both the Smith School of Business and the Centre for Social Impact at Queen’s University. Currently he teaches in risk management at the Munk School of Global Affairs at the University of Toronto. He also likes to share his expertise and resources with promising socially innovative start-ups, such as TruLeaf Sustainable Agriculture, DeepLearni.ng, and Receptivity, to name a few.

As he has engaged in a plethora of ventures, Durland’s understanding of the concept of “risk” has continued to develop alongside the new developments in technology that are the driving force of many of the projects he is a part of. In his talk, Durland highlighted the fact that we are living in a “risk society.” In the Pre-Industrial society, humans believed that we lived at the hands of the gods and that it was fate that created the outcomes in our lives. Through the period of the Enlightenment and as we transitioned into the Industrial age, our discovery and dependency on science led to the creation of the concept of “risk” and the idea that we could control the outcomes of our circumstances. By being able to control factors to mitigate risk, this also meant that we could begin to assign responsibility to a negative outcome if a factor did not perform as intended. In today’s risk society, it is recognized that risks can no longer be contained spatially and temporally, but that the interconnectedness of our society creates a large, tangled web of risks wherein implications of one factor under-performing can be astronomical. As we saw in the most recent financial crisis, corporate maleficence in the United States can shake economies across the world. Because of the lack of ability to contain the implications of our decisions and actions, this makes it more difficult to assign responsibility for outcomes. The interconnectivity of our world also means that we can no longer be narrow minded when it comes to thinking about “risk.” Traditionally, risk is believed to be connected to anything that could be modeled and measured quantitatively. However, given the negative repercussions of many actions that have occurred within the past decade alone, we need to expand our notion of “risk” because our current conception of risk and our fancy quantitative risk management tools are limited. We need to consider broader social, environmental, and economic risks that are linked with our actions. As Durland highlighted in his talk, this is very important when it comes to innovations, especially social innovations.

A fundamental element of our risk society is the concept of “manufactured risks,” which are risks that are created by the result of new innovations. The “manufactured risks” of new innovations need to be considered because these innovations create completely novel environments that are unpredictable. For example, one of the most notable modern-day innovations fraught with manufactured risks is artificial intelligence (AI) technology – a topic many people start feeling anxious about because of its many implications. How is it possible for risk managers in today’s risk society to conceivably manage the plethora of unpredictable risks imbued in today’s innovations? Durland believes that it will be with the power of our imaginations and our age-old affinity for storytelling.

One of the unique aspects of being human is our ability to conceive, communicate, and emotionally connect to stories. We use stories to interpret the world around us. We can think of entrepreneurs as storytellers: an entrepreneur conceives a work of fiction using his or her imagination, a business idea he or she thinks will make an impact in people’s lives. The entrepreneur then makes the connections and secures the resources to take action and make his or her story come alive. The difference between entrepreneurs and the kind of risk manager that is needed in today’s world is the number of stories they conceive. The entrepreneur thinks of and sticks to one story – the business idea. The risk manager comes along and tries to think of as many possible stories surrounding an entrepreneur’s idea that could become a reality. Essentially, risk management is all about employing your imagination to think of as many stories as possible that have the potential to unfold, and then thinking of processes to put in place to mitigate the potential from those stories coming true. The broad mindset a risk manager needs to employ is supposed to help them conceive stories not just in the economic realm, but also the uncertain social and environmental implications of a new business venture.

When asked by an MBA student for advice he would give to a budding social entrepreneur, Durland was quick to state that a social entrepreneur must blend the roles and characteristics of an entrepreneur with that of a risk manager. The lack of awareness of risk management in the entrepreneurial innovation process is a key reason why many start-ups falter and cause more trouble than the good they had intended. So entrepreneurs, it’s time to expand your imagination and start to compliment your entrepreneurial thinking with thinking like a risk manager. Stay focused on your ingenious idea, but imagine how your idea will impact the world around it. Think of stories that could unfold and how you will respond to them if they do. As you will be creating “manufactured risks” with your innovation, you have the responsibility to ensure that the impact you and your idea have on society is a positive one.

Article written by Michèle Whitcombe