You're facing risk-averse stakeholders. How can you discuss worst-case scenarios without causing panic?

In my practice as CRO, the best way it worked on worst-case scenarios discussions with the risk-avert stakeholders is to ask them a question: “Without arguing on the probability this worst case scenario will materialize or not, I want first to hear what we would when it materialises?” I’m not a psychologist, but usually giving people first direct task to think of the outcomes rather than debating on the assumptions makes the whole consideration more constructive. You may return to twisting the assumptions later, but stakeholders should realize one simple thing: if they have plan for the worst case scenario, other scenarios are easier to deal with.

O bom entendimento sobre conceitos e fundamentos ajuda nas discussões. É papel do profissional de riscos introduzir e educar sobre esses conceitos a cada oportunidade. Eu costumo abrir a conversa afirmando que não existe risco zero. Como sabemos, a única forma de eliminar completamente o risco é cessar ou não iniciar determinada atividade/iniciativa. Quando conduzimos workshops ou facilitamos discussões para a avaliação de um risco, é importante pautarmos a discussão em dados e informações. As percepções são importantes e vão ter um peso na tomada de decisões, mas um racional robusto traz um ponto de equilíbrio para a discussão.

Frame risks as inherent to any business venture, emphasizing that thorough risk management is a standard part of due diligence. Using clear, non-alarmist language, outline the systematic process of identifying, assessing, and mitigating risks. This approach helps reassure stakeholders that potential issues are carefully considered and that proactive measures are in place to safeguard against them.

When discussing worst-case scenarios with stakeholders, it's beneficial to frame the conversation positively. Highlight how preparing for these outcomes enhances resilience and strategic planning capabilities. Emphasize that considering such scenarios is a proactive approach, aimed at fortifying the project against potential challenges rather than foreseeing failure. By positioning risk planning as a means to strengthen the project's foundation, you inspire stakeholders to see it as an essential element of achieving success. This approach fosters a constructive dialogue focused on proactive risk management and strategic advantage.

In school, your teacher may have drawn risk aversion as a continuous and curving utility function. In real life, your stakeholders' reactions can be discrete, step-like.

When discussing worst-case scenarios with stakeholders, it's crucial to provide assurance by emphasizing that all risks are actively monitored and that robust contingency plans are in place and ready to be implemented if needed. Communicate that risk management is a continuous process, with regular reviews and updates to plans as the project evolves and new information arises. This ongoing vigilance ensures stakeholders that risks are neither overlooked nor underestimated, fostering confidence that the project is well-prepared to navigate challenges effectively.

If your stakeholder repeatedly sends their proxy to face off with you, that's possibly another indication of the extent of their risk aversion.