Travelogue: Risk Appetites
Risk managers have to understand their employer’s risk appetite, which consulting juggernaut PricewaterhouseCoopers defines as “the amount of risk an organization is willing to accept in pursuit of strategic objectives.” Risk appetite does not have to be consistent across organizational functions. When UC Berkeley faculty members wanted to go to Africa to study an ebola outbreak (ebola is fifty times more lethal than Covid-19), we let them, because their research brought value to the world and, secondarily, helped maintain the campus’s reputation as one of America’s top research universities. But we prohibited class instruction in countries where a State Department Travel Warning was in effect.
So when The Fabulous Wife and I went to Arizona a couple of weeks ago, the shrinking part of my brain that sees the world in risk management terms noticed that Arizonans have different risk appetites than Californians, especially when it comes to driving and Covid-19.
We rented a car in Arizona (ouch! so expensive) and drove hundreds of miles, mostly on freeways but also in towns, including Phoenix. If memory serves, there wasn’t a single time the behavior of other drivers caused us to fear for our lives. Speeding was common, but also predictable: roughly five to ten miles per hour above the posted limit. No one wildly veered from lane to lane (or across several lanes at once) in an attempt to jockey one car-length ahead. Hardly anyone tailgated, even in the fast lane. Most amazing of all, Arizona drivers used their turn signals.
This in contrast to California drivers, especially in the Bay Area. The Fabulous Wife and I feel like we take our lives in our hands every time we get behind the wheel. We also take our lives in our hands every time we walk through an intersection. Our best guess is that local drivers (and bicyclists) have discovered that the one social setting they can get away with being baldly aggressive and selfish is the road, so they make the most of it.
I should mention that the data do not bear out my impression. According to the Insurance Institute for Highway Safety, in 2020 Arizona had 14.7 vehicle deaths per 100,000 population, whereas California had only 9.7. And our sample size was small, perhaps 750 miles driven in a state where motorists logged nearly 66,000,000,000 miles in 2020. So my sense that Arizonans’ risk appetite behind the wheel is lower than that of Californians is almost certainly an illusion. Still, that illusion was immensely comforting.
I judged the risk appetite around Covid-19 by how many people I saw wearing masks in airports and on planes. I did not do rigorous counts, but in California it seemed roughly half the passengers wore masks, while in Arizona the number was much lower, at best maybe one in five. And here the data bear out my observation. According to US News and World Report, through May 19, 2022, Arizona’s Covid-19 death rate was 410 per 100,000, whereas in California it was just 232 per 100,000.
So if we go by the data, it’s fair to say that, on the whole, Californians have a lower risk appetite than Arizonans.
The standard argument is that lower risk appetite equals less fun. Maybe. It all depends on how you define fun, doesn’t it? Even before I became a risk manager, I preferred a sedate lifestyle. For me, fun consists of hanging with The Fabulous Wife and our cats, getting together with friends and family, exercising, reading, writing, and traveling. I don’t need to defy death to feel that I’m alive.
But if I ever do, I’ll just ride the California freeways — no matter what the data say.