Why we must embrace risk to achieve development

By Sohail Hasnie 28 October 2015

A warning sign. Multilateral development banks like the Asian Development Bank may not survive unless they innovate and take risks. Photo by: Darren Foreman / CC BY

Our working relationship with risk is like reading classic novels: we claim to have read them at social interactions, but few of us are willing to go through the pain of actually reading them. And while we take the risk of being hit by a car when we walk across a busy intersection, we tend to be very risk-averse in a corporate setting.

In our everyday work, we do assume some small risks, by design or dictated by circumstances, with the same result — whether we like it or not, we like to brag about it when our little gamble produces more than the expected benefits. That’s exactly what happened this week with our team.

The challenge at hand is rehabilitating a 40-year-old hydropower station in Toktogul, Kyrgyz Republic. The 1,200-megawatt station has been producing more than 30 percent of the country’s electricity since early 1970s, bringing heat and light to citizens continuously during the winter. Life without Toktogul is unimaginable for those citizens.

You may be wondering by now what was the risk, and what this is all about. We did something different by inviting potential suppliers of turbines and generators to ask them if our design and timetable made sense before issuing the bidding document. We took the opportunity to assess their capability: who they are, how many projects they have done, what technical experts they have, etc. so we can set the right qualifications criteria for the bidding. It wasn’t really a risk in itself — just the usual uncomfortable feeling about doing something different.

Before we started, some of us were concerned that we were not fully ready. Since we had not done this before, we did not have guidelines or lists where we could tick a few boxes. But with support from management, we continued anyway.

It was a bit overwhelming when we walked into a room filled with 30 strangers, among them representatives of six of the top turbine and generator suppliers: Austrian, Chinese, French, Japanese, and two from Russia. The initially daunting task, however, gradually eased into open discussion, and we got excellent feedback and insights. We learned simple solutions and ideas to solve the logistical challenges of carrying 700 tons of cargo across landlocked countries in Central Asia. We also learned some of the tasks will take longer than had we planned, according to our initial feasibility report.

One could argue that fixing existing units in a hydropower station is a relatively easy undertaking: no people must be resettled and there are no environmental impact issues to deal with. It’s as simple as changing the four pistons in a car engine. Except there is one major problem: each of the four 300-megawatt units weighs about 700 tons, and the Antonov 225 Mriya, the largest cargo aircraft in the world, can only carry up to 250 tons.

After checking out the old turbines, generators, structure and talking to the technicians, we learned the details of many things that could have gone wrong, and little assumptions that we did not double-check. The collective knowledge of the potential bidding firms gave us clear insights into what was possible, and what was not. Although our team had a lot of experience with hydropower systems having worked on similar units in many countries through the years, the Asian Development Bank teams have never been involved in changing “pistons.”

When we walked nervously into the room on Monday morning, we didn’t know what lay ahead. But when we walked out on Friday evening, we knew it had been the right thing to do. Without these five days, we would have been walking around partially blind for the next few years.

Meeting the people from Toktogul brought in another reality. This is yet another project in another country to us, but for them it is their life. Some managers told us they have been working for the plant their whole lives. For them, the world is Toktogul.

With our projects come large responsibilities. When we get carried away by contracts awards, bid evaluations, bidding documents, consultant reports and back to office-reports, we should never forget that one little mistake in our assumptions can delay a project by years, potentially throwing millions of people into darkness. One mistake, one accident caused by poor design can even destroy a whole unit.

That’s why it’s never the wrong time to challenge our current way of doing things, or introduce a minor twist in our existing processes and our SOP mindset, as it can produce extraordinary benefits to our clients and societies.

This week the win was ours — one tiny idea, and a bit of risk, produced more than what we expected. We may get a pat on the back, or not, but our win this week will not guarantee another win next week. And just because there is no guarantee of a win, we can’t just keep on doing the same thing, producing the same result. Without risks, small or big, we won’t grow.

In this ever-changing development environment, multilateral development banks like ADB may not survive unless we innovate and take risks, much like actually reading a classic novel instead of just bragging about it.

And like the Chinese proverb says: “Those who say it cannot be done should not interrupt those doing it.”

What do you think about risk management in development? Have too many organizations and professionals become too risk-averse? Have your say by leaving a comment below.

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About the author

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Sohail Hasnie

Sohail Hasnie is a principal energy specialist with the Asian Development Bank. A firm believer that the solution to climate change lies in new technology, he has applied new technology to ADB projects in several Asian countries. Before joining ADB, Sohail worked for the state power utility and independent regulator in Melbourne, Australia.


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