by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
info@rsdsolutions.com
This past weekend, the MBA students at the school where I am an Associate Professor (Dalhousie University) completed a weekend long computer simulation exercise. The well-known computer simulation – that many MBA programs utilize – is quite complex as it incorporates a wide variety of interconnected factors as it tries to give students a feel for what it is like to make decisions in a real-world competitive environment.
The students appeared to enjoy participating in the simulation quite a bit and I took the time out to sit in on the debrief which was being conducted by one of the schools more engaging professors. The professor had the students going discussing the thinking that led to their success or failure in the complex simulation.
After a short period of time, the discussion amongst the students was quite lively. However, it took a turn that perhaps was unexpected by the professor. Despite his best efforts to steer the conversation towards business principles, the students kept steering the conversation towards their efforts to reverse engineer the game. In other words the students who were best at the game were not necessarily winning because they were using the best business practices. Instead they were winning because they were best at figuring out the artificial constraints and limitations of the computer simulation.
Here is the issue for risk management: do we become good risk managers because we make good risk based decisions or because we make decisions that are based on how the artificial constraints and limitations of the risk management game (and regulatory game) are imposed?
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