How long do you remember risk events?


Why don’t we (collectively) learn from the past? Why do we dismantle programs and safeguards as we move further away from the risk event? Why do we make statements like, “I’ve never experienced this before”, or “This has never happened” when there is proof of a risk that materialized into a flood or pandemic or recession, often within the past 100 years.

“I’ve never experienced this before”


These are questions I ask myself whenever a “new” risk event comes along. My search for literature on this often turns up some interesting stuff that may be focused in a narrow field but is applicable to risk management in general.

An article I ran across a few years ago explores this very topic. It is called, How long do floods throughout the millennium remain in collective memory? and was published in Nature Communications in 2019. In this article, the authors studied historical, extreme, flooding going back nine centuries and the affect it had on settlements along the river that flooded. They looked at the settlements that were impacted and then moved to higher and presumably safer ground. And then asked the question, how long did it take for the cities and towns to move back into harm’s way? Rivers have always served as important sources for food and transportation and all of that becomes more difficult when you move away from it. So, despite the real time and personal experience of the people who went through the flood, how long did it take to “forget” the tragedy and resume living by the in the area of danger.

How quickly we forget…


Without going through the fascinating study in detail, below are the summarized findings;

  • The memory of the event begins to decay after about five years. And the forgetting curve is logarithmic – the more time that has passed since the event, the weaker are the memories about it.
  • People waited to begin to re-inhabit the area of risk about 25 years after the event. This was the equivalent of one generation.
  • The knowledge of the flood passed down from generation to generation turns into a myth. Myths are discussed but not really believed.
  • History really does repeat itself, even when reliable knowledge about flood events and about flood prevention is widely available.

What does this mean for the risk professional? As far as good news, it means the profession is necessary as a formally defined job and the role of risk identification, planning and reacting is necessary in today’s society. But as far as the bad news, it means we must always fight the uphill battle, especially as we move further and further away from the risk event.


The current thinking…


To put this into context, the Great Recession of 2007 to 2009 has already entered the risk memory decay zone because it was more than 5 years ago. And the 1918 Flu Pandemic has passed the generation marker and is now thought of as ancient history or for some people just a myth. What does this mean for our pandemic and its induced recession?

For the financial risk part of the event, we are still within the realm of remembering what happened which means we are most likely prudently managing our expanding credit risk exposure. And ramping up the reserving process is taking place. But since the last recession there has been an increased emphasis on increasing the analysis and the modeling of the portfolios to gain more insight into the issues within the portfolios.

For the operational risk, we are scaling up our risk programs but by and large we have a limited view as to how we are exposed to the pandemic. Had we had recent experience with a pandemic of this magnitude for example, we could have drawn on the experience of those who lived through it to understand how norms changed during the flu pandemic and made our plans based on this information. Instead we are in a stage of shock and disbelief, which is hindering the ability to manage through this with the appropriate level of support.

As risk managers, we must continuously work to identify, lay out and address the risks and provide leadership through the event. We must do all of this knowing that the support is there for the financial risk but not so much for the operational risk.

I salute all risk managers who are working through the pandemic and the recession. Your valuable work may not be recognized fully now but will be as we move forward.


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