The 500ft Rope Swing - A Risk Assessment
Risk assessments help companies confidently take the big risks
Last week we posted an article about the giant rope swing Ally subjected herself to, all in the name of “fun” and a real-life experiment in risk-taking. We walked through the high-level steps of a risk assessment as it relates to jumping off the cliff. Hopefully this made the concept of risk more consumable. Do your eyes still glaze over when we say, “risk assessment”? If so, revisit the previous article:
Let’s talk about the experience from the perspective of the rope swing company. They offer several other adrenaline-packed activities, like BASE jumping, but how does a company decide which services, products, or operational lines to pursue? How do you know if the risk is worth taking from a business-endeavor perspective? If you decide to embark on a specific service-line, how do you know what controls and mitigating activities you need? What is too much? What is too little?
The questions are important. Successful businesses maximize their investments. High ROI is the goal, right? It’s the question that plagues every business owner or company leader: what, where, and how much money should be spent? This cannot be answered without proper risk assessments and a thorough review of the details. That’s where we come in.
Your business idea might not be to throw people off a cliff and hope they survive, but no matter the business venture, risk is part of the game.
Assessing the Risk
Clearly defining the risk(s) is the first step. For the rope swing company, the death or injury of a client may seem like the obvious risk, however, that is the risk to the client. The risk to the company is what happens next. If someone is injured, the company could face significant litigation or reputation damage. Even with waivers signed by the willing participants, something could go wrong that isn’t covered by the waiver and whether or not the result is litigation, the company does not want their clients to be hurt or die because that could result in a total loss of business operations.
With that in mind, just like with the risk assessment conducted by the jumper, the company must define their risk tolerance and allowable error rate. For this business venture, the desired error rate is likely close to 0%. Even with one incident, the potential outcome is too severe. This means that their controls must be effective 100% of the time and if they find a single issue (e.g., broken carabiner or fraying rope), they would likely need to suspend operations completely, or replace those parts before proceeding.
We spoke about controls in the previous article: the safety mechanisms and actual tools used to execute the jump (e.g., harness, ropes, etc.,). However, there are other factors that are crucial to mitigating the risk to an acceptable level. For example, training the employees how to follow the defined process accurately and consistently. The steps may include: how to secure the harness on each person, where to have them stand when preparing for the jump, tethering them to the pole prior to attaching the rope, checking the carabiners, providing the jumper with the appropriate instruction to execute the jump, and then pulling the person back up to the top of the cliff. All of these steps and tools are critical to the safe execution of the jump. If one thing is missed, there is a risk that the entire process fails.
Understanding how important the controls are determines how often those controls should be tested, and what the testing involves. In this case, they may test the strength and security of the carabiners with every single jump. This may include a sharp tug, rechecking that the screwed latch on the carabiner is taught, and a visual review of all the pieces. These are “in-line controls” that are embedded within the processes and procedures, as the work is being performed. Other controls may be executed periodically, such as a daily check of the ropes, harnesses, and other equipment. Another daily control may be a review of the weather; if it is too windy, or raining, swinging from a rope off a cliff is probably not a good choice.
Continuous Monitoring
Once all of this information is outlined, and the company is up and running, you’re done, right? No.This is a significant first step, but risk assessments aren’t one-and-done. They require continual evaluation to understand if anything in the environment has changed. There may be times when more controls are needed, or when new controls should be added. Perhaps the business wants to add a feature to the rope swing, like a platform. The risk assessment would need to be updated to account for the new elements.
A complete risk management framework also includes other components, such as a culture that encourages employees to speak up when they notice that something is not operating effectively. Imagine if one of the employees notices that one of the ropes is starting to fray, but isn’t taken seriously when they voice their concern to the manager. The ability for employees to speak up and be taken seriously, and then for the company to act on those concerns is a crucial component of operating ethically and with a risk-focus. These are all parts of the foundation of a business that ensure it operates with integrity, avoiding unnecessary risks.
Ready to take the leap?
Our goal at Ross + Schuda is to provide our clients with confidence in their business endeavors. Taking risks can be scary, but when approached with a proper risk assessment and continuous monitoring, companies can proceed confidently and focus on growth and profitability.