Survival Skills: Risk Management Vs. Risk Aversion

It’s been said that our modern society is sheltered and risk averse, covering everything from hot coffee to plastic bags with massive warning labels and opting for “safe” over “functional” in many products. When it comes to a disaster all of those shields we’ve constructed will be shattered, leaving many people with a weakened sense of awareness and self-preservation. Therefore, it is important for any prepper to understand what situations require management of risk rather than perfect protection, and how to properly use it to keep you and your family reasonably safe.

What is the difference between Risk Management and Aversion?

Basically, risk management tries to find a balance between the loss if an opportunity goes poorly and the profit if it goes well, while risk aversion attempts to find a solution in which a positive is guaranteed even if the profit is significantly lower. Someone who invests money in the stock market manages risk, since he has the potential for high returns but also to lose all of his money if things don’t go well. A risk averse man, on the other hand would invest his money in a bank account with a guaranteed rate of interest, even if it would take him years to achieve any meaningful profit.

What does this have to do with prepping? Well, generally speaking our society tends to be risk averse and most of our products are built with safeguards fitting that mindset. It’s almost to the point where you expect cars to come with “Be aware that being hit by this could potentially cause injury or death!” stickers on the fender. Unfortunately, this means that even many prepared folks rarely exercise the risk management part of their brain, developing habits that could be downright dangerous when the harsh realities after a disaster come to smack them in the face. Put simply, currently many of our products do the safety thinking for us, but after a disaster that is going to change in a hurry.

When to manage risk and when to avoid it

That said, there are areas where risk aversion is 100% appropriate. After a disaster, food/water sanitation and any kind of medical care come to mind. Aside from absolute necessity, there really is very little profit to be gained from risking food poisoning or an infected wound in a world without easy access to hospital care. Excessive safeguards like being selective with your foods and designating a dedicated sickroom make perfect sense there, and minimize the chance for a mishap that could cause major damage.

For almost everything else, though, you will have to manage risk. Something as mundane as planting a yearly garden requires educated guesses regarding the last frost date, what kind of summer you will have, when to plant the fall crops, and when to finally till under even productive plants for the next year. Unless you spent a lot of extra time and money setting up a greenhouse with non-electric heating, you just won’t have the option to grow plants without needing to consider the variableness of the weather.

How to properly manage risk: understand the situation!

The key to managing risk is to know what you stand to gain, what you might lose, and the chances of each outcome. This may seem simple, but remember that in a disaster the person making all of those numbers will be you and your group. In order to understand the risks, you have to know the underlying principles behind the decision you’re making.

To use an example, I talked with someone who renovated homes for a living about how he knew when he had fudge room for building walls, counters etc. In some cases he would just make a rough estimate on how level or square an area was without even needing a tape measure, while in others he would spend 10 minutes ensuring that he had everything just perfect but to me there seemed no rhyme or reason to it. He explained that he knew the risks involved: the imperfect measurement was fine in one spot because it had a much greater margin of error before any problems would arrive so he would waste time getting that area perfect. The studs supporting the roof and walls, though, needed to be as perfect as possible because poor alignment there could cause damage to the house and ruin its value. He knew where to gain the maximum profit from his time because he knew where to allocate his effort in risky situations.

A prepper might have to decide if he can spare 2 or 4 people to go on roving patrols, but unless he knows the risk of having fewer people he can’t know if it is necessary to waste additional manpower walking all over Creation instead of hoeing the garden or repairing the roof. If he doesn’t know what kind of local predators might come after his chickens he can’t know if he can use the cheap fencing or the expensive stuff with greater strength. If he doesn’t know when the last frost date is in his area, he can’t know what the rough chances are for frost that could kill the seedlings that will feed his family.

Knowledge gives you the power to mitigate and manage risk by choosing to focus resources on high profit, low risk situations instead of just not doing anything with any risk whatsoever. It gives you greater flexibility because the risk averse prepper won’t be able to act in a situation where there is always risk regardless of the choice, while you will. It will also allow you to make the best of a situation and possibly improve your situation greatly by taking educated, measured risks with acceptable losses.

In short, you must know how to manage risk by learning the fundamentals behind each action you take. You need to understand “why” you do things, not merely that certain things need to be done. If you can master this mindset, you will be much safer and more settled than  those who only work to avert all risk.

Your thoughts?

Which do you side with more, risk aversion or risk management? Are there other areas where risk aversion makes more sense than management, or vice versa? Let us know in the comments below!