Anti Risk Homeostasis

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.

I have written about risk homeostasis several different times before.  (Here is one link to an article in RMA Journal, http://www.rsdsolutions.com/quotis-your-risk-system-too-goodquot-article-rick-nason-published-rma-journal)

Risk homeostasis basically says that no matter what actions we take to reduce risk, the response of an organization (or individuals) will act to counterbalance it so the total amount of risk remains more or less the same.

This morning I got to witness a case of anti-homeostasis – in other words, by taking on a risky venture, the system will act so as to reduce the risk.  I guess I need to explain that confusing statement.

The east coast of Canada where I live is being hit with the intersection of the storms that have shut down the east coast of the US, and a second storm that has crippled central Canada.  In a nutshell the weather here is UGLY!  My daughter however had to get to her job where she serves an essential function (note: virtually all businesses are closed due to the storm).  As a parent you always worry when your kids are driving, but particularly so when the driving conditions are bad.  Today the driving conditions are about the worst I have ever seen them.  (Driving is currently banned in Boston which is getting just one of the two storm systems we are getting.)

As I waved good bye to my daughter this morning I had the normal parent worries about their children.  About ten minutes after she left there was a phone call from my daughter.  Recognizing the number on caller ID I picked up the phone with trepidation.  It was my daughter calling from her car (hands free of course).  She wanted to tell me to stop worrying.  There was an extra compliment of snow-plow trucks on the highway she said, but there were no other cars.  Most people simply considered it way too dangerous to drive.  The consequence is that my daughter had a relatively decently cleared road to herself so the net effect was that the drive to work was probably less dangerous than it would have been on a typical summer day when the road conditions were excellent.  In other words, dad had little to worry about because of anti-risk-homeostasis.