How managers should think about risk-a case study from the oil and gas industry

We discuss how managers should think about risk when facing challenging decision-making situations with large uncertainties and high values at stake. The paper is based on the thesis that managers are well qualified for the proper understanding and management of such risk and uncertainties, but that there has been a lack of suitable conceptual frameworks available. We argue that the key to success in this respect is to be open to broader risk perspectives than the common damage-probability view. Risk also has to reflect uncertainties and knowledge, and potential surprises relative to this knowledge. A case taken from the oil and gas industry is used to illustrate the discussion. The main aim of the paper is to guide managers and analysts on the conceptualization of risk and on which principles to adopt in order to understand, assess, manage and communicate risk in relation to situations of large uncertainties and high values at stake.