by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
I am a fan of Seth Godin’s blogs. http://sethgodin.typepad.com/. On July 3 last, his blog was titled “The non-optimized life” The blog talks about the trade-off between trying to optimize your life and getting on with it (my phrasing).
That seems a lot like the state where risk management is today. I have talked before in many places about the misplaced emphasis on optimization in risk management - in particular see my presentation on “Have We Lost The Plot” http://www.rsdsolutions.com/rick-nason039s-presentation-prmia-toronto-april-2010-quothave-we-lost-plotquot .
In risk management we need “to get on with it” rather than increasing our efforts to optimize the mathematics, optimize the organizational structures, optimize our risk metrics, and most of all optimize our regulation around financial products.
Optimization is a fool’s errand, and the sooner we recognize it as such, the better.
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