What do i mean by risk? Well we humans are all risk evaluating machines by design. Do I hunt that dangerous animal for food? Do I cross the road now or later? Do I eat the last biscuit or leave it? Do I sleep in or get up early? Do I apply for a job in a different country? Do we have a baby? In each instance we evaluate the pros and cons of taking an action. We realise that each action has a certain consequence (both positive and negative), we decide if we want to live with those consequences and act accordingly.

If we get slightly more scientific with this idea we would come up with the equation risk = consequence x likelihood. Our day to day decision making is so instinctual we often don't break it down to the two main elements, consequence of an event happening and the likelihood of that event taking place.

Risk = Consequence x Likelihood

Take crossing the road for example. The event we are most scared of is getting hit by a car. The consequence of that is pretty severe, death or some pretty serious injury.

This is why most of us are very careful when crossing a road. We are trying to minimise the likelihood of being hit and subsequently minimise the risk we are taking. On a busy road we may wait a long time or use a safety crossing to reduce the likelihood. Or maybe the road is instead busy with bicycles or pedestrians, in which case the consequence of getting hit is much lower and therefore we don't worry about the likelihood quite so much. The end result is the pretty much the same and we take roughly the same amount of risk each time we cross a road.

Evolution has caused us to be extremely good at assessing immediate threats and identifying risky behaviour through instinct. But we are not so good at assessing longer term risks that happen very infrequently such as living next to a volcano. To survive and be successful we have to over-ride our instinct and instead apply logic to the situation.

The three big risks of climate destabilisation, peak oil and the debt crisis are risks that fall into this category. They are inherently uncertain by nature, in that the likelihood of all the consequences surrounding these ideas happening is not fully known our brains have difficulty in assessing them. This is nothing new. Businesses deal with this all the time and they use a risk matrix to help figure out what to plan for and what to ignore.

A risk matrix isn't complicated, it is just a way of organising risk by their consequence and likelihood parts as shown below. They are usually sorted into low, medium, high and sometimes extreme risk events.

A high risk event may be something like having a fire burn down your house. Very unlikely but the consequence is very high. Or it could be a more likely, lower consequence event such as working barefoot at a construction site and receiving a foot injury. In both cases you would mitigate or lower your risk, which is just a fancy way of saying be sensible. You would take out house insurance to minimise the financial consequence of losing your house or you would wear steel capped boots to minimise the consequence of physical injury should you step on something sharp. Both these risks can then be downgraded to a lower state, to something we can all live with.

What frustrates me so much about the debate surrounding these three issues is they are almost never framed in terms of risk but instead just likelihood. I don't think anyone would seriously argue that a nationwide drought or extremely high oil prices or another financial meltdown doesn't entail some extremely significant consequences. But there seems to be endless argument over just how likely these events are to happen. If you put any of these events into a risk matrix they would all go in either the high or extreme risk category. The consequences are so severe that it doesn't matter if you think there is a 5%, 50% or 95% likelihood of it happening, they are still high risk. Just like the risk of your house burning down, you would be foolish not to get insurance. So why refuse to look at the big issues facing us in the same way?

So I would like you to think of the issues of climate destabilisation, peak oil and the debt crisis in terms of risk. They are all very big, very complicated and interrelated problems that have multiple compounding consequences attached to them. It is not easy to understand all the direct and flow on effects that say doubling carbon dioxide levels or doubling the oil price would bring. The complexity is similar to that of the human body and it's probably impossible to know it all. But in the context of risk we don't need to know it all. All we need is is a rough idea of the consequences and the likelihood of those consequences occurring to decide whether we should take action to reduce the risk or not.

We have this already. There have been countless reports from major scientific organisations all around the world stating that climate change is happening and not only are catastrophic consequences expected, but they are even more likely than previously thought. Oil is a finite resource so peak oil is inevitable, it's just a question of when, but $100+ a barrel oil has to be a pretty good indication that we are at the very least starting to approaching the peak. 2008 proved both the likelihood and consequence of a debt induced financial meltdown occurring. The chances of another one occurring is quite high as most of the underlying problems have yet to be addressed.

So the consequences are high and the likelihood is high. We are living in a time of extreme risk that all stems from our current economic model which is based on fossil fuels and infinite growth. We need to fundamentally reform this system if we ever want to reduce the risk.