Risk versus Opportunity
In risk management it is perhaps cliché, but I am going to start this entry by talking about the Chinese character for risk anyway - 危机. The character is made up of two symbols, the first is the symbol for “danger” and the second the symbol for “opportunity”. This makes risk a mix of danger and opportunity. Usually risk is associated with something negative. ERM opens up the definition of risk and lets in opportunity as well; after all, a coin does have two sides.
A single event may have a number of dangers or opportunities associated with it. Now, here comes my opportunistically lighthearted but politically dangerous example. It is about this guy:
Risk event - impeachment of Donald Trump
Besides the obvious risk to Donald Trump that he will be removed from office, below are excerpts from two articles giving an example of a possible dangerous outcome for Democrats and a possible opportunity for Republicans resulting from the same risk event.
‘Democrats risk impeachment backlash after charging Trump’
Source: Charter, David. (2019). “Democrats risk impeachment backlash after charging Trump”. The Times. December 14, 2019. Available at: https://www.thetimes.co.uk/article/democrats-risk-impeachment-backlash-after-charging-trump-l09jgrh50
“It was private polling showing that impeachment was shifting voters to back Mr Trump in key swing states that triggered Michael Bloomberg, the media billionaire, to make a late entry into the Democratic presidential race last month. On Thursday he announced that he would pump $10 million into shoring up Democrats at risk of losing their seats after voting in favour of impeachment. Most are moderates who were elected last year in areas that voted for Mr Trump in 2016.”
Risks are measured by probability and impact. Probability - data here is scarce given he is only the third president to be impeached. Impact - there is a direct cost covered by Michael Bloomberg of $10 million but there are many other indirect and difficult to measure costs like lost seats in the government.
Now let’s look at the opportunity to Republicans of the impeachment event.
‘Trump And Other Republicans Use Impeachment Process As Fundraising Opportunity ‘
Source: Cornish, Audie and Levinthal, Dave. ‘Trump And Other Republicans Use Impeachment Process As Fundraising Opportunity.’ All Things Considered. National Public Radio, December 18, 2019. Transcript, https://www.npr.org/2019/12/18/789460021/trump-and-other-republicans-use-impeachment-process-as-fundraising-opportunity?t=1580291887784.
“In the days following the House Democrats' announcement of an impeachment inquiry, President Trump raised more than a million dollars from big-dollar donors for his reelection. In the months since, impeachment has been a central component of his fundraising strategy, and he's not alone. Politicians of all stripes are using these hearings to bring in money in advance of the 2020 races.”
On January 2nd 2020, The New York Post reported that Trump raised $46 million in the fourth quarter of 2019, more than any of his Democratic rivals to date, and it was their best fundraising quarter to date.
I wonder how unexpected this was for both parties? Perhaps they did their due-diligence beforehand and weighed “all” costs and benefits. If not, of course political parties can benefit from thinking more about risk and opportunity and implementing some fundamentals of ERM.
In the next post, I’ll elaborate more on how the definition of risk must shift with the ERM mindset.