Imagine you are on a window ledge ten feet above the ground, if you jump there is a risk you may break your leg or at best sprain an ankle; your appetite for this risk is low so why jump if you don’t have to? However if there is a fire behind you and you need to jump to save your life, then your risk assessment is modified by the greater risk of death by fire. Your appetite for the jump risk increases proportionately with changed circumstances. A risk of harm that was once unacceptable becomes acceptable in comparison to an emerging risk of greater harm. One risk trumps another.
Now picture this imaginary person on the window ledge as the government faced with the risk decision of ending the lockdown. The broken leg or ankle sprain reflects different degrees of impact on the NHS and wider public while the virus remains a danger. While you don’t yet know the probability or nature of harm, a low appetite for the risk to jump is understandable. If the fire burning behind you represents an economy in deep trouble then your appetite for the risk of jumping rises. The risk of jumping to end lockdown becomes more acceptable the longer the economy is on fire. All risk is relative; our response depends on the choice at any one time.
This imaginary scenario is used in governance training on risk perception but could be applied to the challenges currently faced by the government. For board directors it is important to note that risk appetite varies with circumstance and should be constantly reviewed and adjusted to suit the current environment: competitor activity, market conditions and strategic goals. Reporting risk appetite accurately is not only a regulator requirement for good governance, it is helpful to investment decisions of shareholders to appreciate their personal risk. A risk appetite statement that doesn’t change to reflect the altered state of the market is one that is probably misleading.
While experts are still learning about the virus, we do know the risk of catching it can be reduced through avoiding crowds. The risk of dying from it is mercifully lower, but it remains an indiscriminately lethal virus: survivors of a bad case recommend avoiding it at all costs. A public will tolerate lockdown as a price for protection from possible death, but for how long? Tolerance has a trade off against quality of life and restriction of basic liberties close to house-arrest. This balance shifts with time: our appetite for risk changes as the person on the window ledge above proved.
While the public might tolerate life in limbo for twelve weeks, people still have monthly bills to pay: contractual obligations for regular payments to credit card companies, banks and mortgage lenders on loans or advances authorised and approved based on predicated future income. With suspension or termination of this income, lawyers and bailiffs will get back to work but they won’t drive economic recovery. Politically the financial risk may well overtake the medical one in deciding when to end the lockdown, thereby making a proportionate public health risk acceptable. The government will only jump to end the lockdown when the financial heat becomes unbearable.
