Risk Intelligence: Learning to Manage What We Don’t Know. David Apgar. Harvard Business School Press.

Risk Intelligence: Learning to Manage What We Don't Know Book Cover Risk Intelligence: Learning to Manage What We Don't Know
David Apgar
Harvard Business School Press
August 7, 2006

Too many executives think risk management is strictly for technical specialists. In Risk Intelligence: Learning to Manage What We Don’t Know, David Apgar challenges this misconception. Demonstrating that risk management is a core strategic discipline, Apgar provides a straightforward model and accessible tools for mitigating risk.

His framework puts risks into two categories: knowable and therefore learnable – and unknowable, so difficult to prepare for. Apgar explains how to identify your knowable risks and uncover what you don’t know about them. The payoff? You raise the quality of your risk analysis – enhancing your “risk IQ.”

Risk Intelligence helps you achieve these gains by applying four simple rules:

  • Recognize which risks are learnable. Though all risks seem random and therefore impossibly uncertain, some are learnable: you could reuse their uncertainty by discovering more about them.
  • Identify risks you can learn about quickly. The author shows how to score your “learning speed” on particular risks. The higher your learning speed, the more a project is worth pursuing.
  • Sequence risky projects in a “learning pipeline.” Apgar provides guidelines for taking on risky projects one at a time – analyzing the risks underlying each project before moving to the next set of risks. He also explains how to avoid the “unprincipled diversification” that can overwhelm you with new risks to learn.
  • Keep networks of partners to manage risks. Risk Intelligence shows how to build networks of business partners, suppliers, and customers who can collectively manage new ventures’ risks by playing distinct roles.

Apgar also provides two tools for improving your risk IQ: the Risk Intelligence Audit and the Risk Scorecard. The book concludes with a ten-step action plan for systematically raising your managerial and organizational risk IQ. Your reward? Smarter business decisions over time.

David Apgar is a managing director of the Corporate Executive Board, a best-practices research organization serving senior executives at more than 2,500 leading institutions worldwide. He has incorporated many of the ideas of Risk Intelligence in a course on Risk Management and Development at the Johns Hopkins School of Advanced International Studies. He lives in Washington D.C.