Risk Management and the Human Species


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We consider ourselves a smart species; after all, we make smart decisions, we have smart phones, smart cars, smart this and smart that. How smart are we really? A full discussion on that will be a long-drawn dialog, so I will reserve it for another time. In this article I will explore that question purely through the lens of risk management; something that all species tend to do either systematically or by what we may consider as standard operating procedure (SOP). But wait! There is another SOP too, and it is not what you think. The answer is coming – so read on.

Talking about other species, Laurie Santos, a Yale University professor, has shown that capuchin monkeys make irrational choices, taking more risk when they have something to lose than when they have something to gain1 in that they were more risk averse even when it defied logic.

Humans exhibit similar behaviors when making choices. They would rather accept a sure gift of $500 than take a chance on a $1,000 gift that depended on the outcome of a coin toss, given there was no chance to lose anything even if the outcome was unfavorable. On the flip side, they would accept taking a chance based on a coin toss even if the potential loss was $0, or $1,000, rather than swallow a $500 guaranteed loss. The logic (or lack thereof) being they would be the lucky ones who could walk away with no “loss.”

In other experiments (by Dr. Daniel Kahneman and Amos Tversky), they found that framing the question has an enormous impact on how people perceive risk and the decisions they make. Given a choice that a treatment can lead to saving 200 lives out of a group of 600 versus saying it could cause 400 deaths from the same group, 72 percent chose the former, while 22 percent chose the latter2.

That Can’t Happen in the Life Sciences, Right?

Ready to re-think how smart we really are? What is it in our cognitive abilities that pre-disposes us to making wrong or bad choices and overlooking common sense? Consider the following before we attempt to dice that question:

  1. In the late 1990s, pharmaceutical companies reassured the medical community that patients would not become addicted to opioid pain relievers and health care providers began to prescribe them at greater rates3. We already knew how hard it was to quit smoking – how could we not see the opioid addiction crisis coming?
  2. A recent study from Johns Hopkins suggests that medical errors are now the third-leading cause of death in the U.S., having surpassed strokes, Alzheimer’s and diabetes. According to the Agency for Healthcare Research and Quality, there are eight common root causes of medical errors3. When I reviewed the causes, seven of the eight were human related. The question is – how good are humans when it comes to error detection and prevention?
  3. Over 80 million CT scans are performed in the U.S. compared to just 3 million in the 1980s4. Further, many minimally invasive procedures are performed using intra-operative X-ray imaging – leading to high exposure of the patients as well as clinicians in the room. What is the impact of this on human health? There is no clear dataset that helps answer that question, neither is it feasible to conduct controlled studies to find answers. The result – both patients and clinicians live under the impression that the low doses are benign. What is a safe limit? Well – it has gone from about 25,000 mRems during World War II, to 15,000 in 1950, and 5,000 in 19575 – which is the current level. Is that safe enough? No one knows.

What Is One to Do?

Start with a 2x2 diagram as illustrated below, understanding each quadrant with the interpretation provided, and slot your scenario in the respective quadrant.

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  1. Prepared for the Known risks: Most firms that conduct risk management operate in this mode.
  2. Not prepared for the Known: This is where many firms exist, in a state of blissful ignorance. Do you think there is an excuse for them to be in this predicament?
  3. Prepared for the Unknown risks: Those that conduct risk management with extreme diligence will find themselves here, although there will be some surprises. By and large, such firms will fare better than all others.
  4. Not prepared for the Unknown: This is one of the worst situations to be in. I call them the “sleeping” sitting ducks. Don’t worry, be happy, and soon your life will be crappy!

To hone your ability in risk management, step out of your comfort zones and face the reality, no matter how much it hurts. Try slotting each of the previous scenarios A, B and C into one of the above quadrants. I would be curious to see your results.

  • Machine oils and the human body do not mix – nothing new here. Then how and why did a joint replacement company allow the machining of the porous coating (the bone interfacing part of the hip implant) to take place? Porous coatings by their very nature have a high surface area, and the probability that one could remove “all” traces of oil from the nooks and crannies of such coatings is extremely low. It was a terrible loss for the patients, and the company – one that was avoidable for sure. This is a story from the early 2000’s.
  • My mother complained of a sinking feeling two days after she got a pacemaker. Her heartbeat was down in the mid 40’s; same as before getting the implant. I called the hospital immediately to discuss/get guidance and was told this was to be expected. What? If that was the case, why did they put in the pacemaker in the first place. Anyway, after heated debate they agreed to admit her for examination. A lead had become detached. It was replaced, and she came home. Attempts to meet with the quality director or other leadership at the hospital were thwarted by vague arguments and evasive tactics that I simply could not put up with. Finally, I was told this was to be expected since the leads have a detachment rate of between 5–10 percent. My goodness, what would have happened if I had left town for business and my mom was alone at home? Which quadrant do you think I was in? Which quadrant was the hospital in?

Let’s get back to the SOP question we started with earlier. Would it be fair for me to say that in the above examples, and in scores of others, the modus operandi was that of “seat of pants?” Otherwise, how could one explain smart species doing dumb things. I will wait for your answer on that.

All contents of this article are copyright of Rai Chowdhary and may be used by MasterControl under permission from the author.


References:

  1. http://www.cnn.com/2010/OPINION/07/16/ted.future.of.humanity/index.html
  2. Tversky, Amos; Kahneman, Daniel (1981). "The Framing of decisions and the psychology of choice". Science. 211 (4481): 453–58. Bibcode:1981Sci...211..453T.doi:10.1126/science.7455683. PMID7455683.
  3. https://alwaysculture.com/hcahps/communication-medications/8-most-common-causes-of-medical-errors/
  4. https://www.health.harvard.edu/cancer/radiation-risk-from-medical-imaging
  5. http://news.mit.edu/1994/safe-0105

Bio Photo - Rai Chowdhary

Rai Chowdhary is an author, business coach, and entrepreneur. He has coached business professionals and executives for over 20 years at small, medium and Fortune 500 corporations in the United States and across the world.

Throughout his career, he has worked on several products that have improved the lives of millions. Noteworthy examples are healthier snacks, orthopedic implants, minivans for the handicapped, lightweight radiation shields, and the world’s first and only X-ray attenuating cream for clinicians and hospital staff.

Chowdhary earned his M.S. in materials science from Arizona State University, after undergraduate studies in mechanical and production engineering. His certifications include: Exemplar Global QMS and Medical Device Auditor, ASQ-CMQ/OE, Six Sigma Black Belt, CQE, and CQA, Scrum Master.


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