Posts Tagged ‘risk management


Trust and Tolerance

Someone told me that she just realized that I really do not trust people – I merely tolerate them. Hmmm…I never thought of that. I mean, I do trust people albeit only up to a certain safe extent. Like in lending money, for instance. If someone close to me asks for a loan, I make sure that the amount I lend is not more than what I am prepared to cover in case payment is delayed or defaulted.

And for this I was accused of not trusting but merely tolerating the anticipated worst-case scenario.

I remember this risk management seminar I took more than a decade ago. It taught us that risk has two dimensions: probability and magnitude. So in a four-quadrant matrix, risks are roughly classified as low-probability/low-magnitude (there’s a 5% chance that you’ll lose P5,000), high-probability/low-magnitude (there’s a 95% chance that you’ll lose P5,000), low-probability/high-magnitude (there’s a 5% chance that you’ll lose P100,000), and high-probability/high magnitude (there’s a 95% chance that you’ll lose P100,000).

I’d say I’m a risk taker even if the probability of losing is high for as long as the magnitude is low. But once a lot is at stake, I tend to play it safe, no matter how ‘safe’ they say the odds are.

In a certain company, the president explained the importance of credit security. The example he gave was about one sales executive who authorized the sale of goods worth a substantial amount without credit security because of the mutual trust he enjoys with the customer. The president said, “Okay, this customer is very trustworthy in terms of his ability and willingness to pay, and I take that. But what if he suddenly dies of a stroke, and the one who takes over the business is not as reliable?”

I guess we can only trust another person’s intentions, because if we try to consider the possible circumstances beyond that person’s control, e.g., a sudden stroke, we realize that we will be taking risks. However, if the calculated risks are deemed manageable and not unnecessary, it is never unwise to take them.

Perhaps I have unconsciously applied this business principle to my personal life. I do trust people, but only up to their intentions. If I foresee certain significant risks that were not explicitly considered by the person to whom I would be giving my trust, I back out. Unfortunately, sometimes people take it personally.

But some people do have the right to take it personally, especially the one I consider as my life partner, my ‘soulmate’. To hesitate when I think there might be risks unforeseen by the person demanding my trust could mean I don’t trust her judgment. I do trust her intentions; maybe just not her judgment. And in a way, that could mean I don’t trust her at all.

This may be a hard reality for me. But if it’s any consolation, I never totally trust anyone’s judgment – not even my own. I just tolerate and try to manage the calculated risks.

And so to the person who said that I don’t really trust her but merely tolerate her, let me say it this way: I trust you to the point that I can sleep soundly with you by my side with a loaded gun in your hand. Now there’s a risk that you’d have a nightmare of being attacked and so you’d shoot the ‘attacker’ – me, or out of simple clumsiness you’d accidentally fire the gun pointed in my direction. But while the magnitude of the risk is too high, the probability is very much lower than you leaving because you think I don’t trust you. Besides, the magnitude of the risk of losing you isn’t too far from the magnitude of the other risk involving a loaded gun in your hand. inner minds

Attempts at uncovering the underlying simplicity beneath apparently complex concepts as well as the core complexity within seemingly straightforward issues

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