At a Risk Management Seminar recently, I heard a discussion of Risk Gearing.  At first it seemed a bit academic, but I soon saw that it is very important.

What does it mean?

  • When we try to evaluate a risk in order to prioritise it and/or to decide how much money to spend on controlling it, it is tempting to look only at the immediate cost of the thing occurring e.g. the amount of money that could be stolen in a break-in or the cost of compensating someone who blamed you for his/her injuries.
  • The point is that there might be secondary costs that were much bigger than the immediate ones, such as the damage done to your property in breaking in, the damage to your reputation from the accident, the time and effort you or your staff have to put in so as to sort out the claim.

So What?

Gearing is the ration between the obvious immediate costs and the overall final costs of an incident.  It is important to take the bigger picture into account when making decisions about priorities and the amount you are prepared to pay to reduce the risk.

So get into gear!