Wednesday, February 23, 2011

The Flawed Risk Question

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.rsdsolutions.com

info@rsdsolutions.com

 

I am currently teaching an Enterprise Risk Management course to senior people in the MBA Financial Services program at Dalhousie.  I recently got back one of the first sets of assignments and was marking them on a plane ride to visit one of RSD’s clients. 

The marking was going quite well until I came to one student’s answer that gave me pause.  The student started their response to the question by stating – “This question is flawed.”  Interesting I thought.  All of the other students had answered the question without any such trouble.  The point is that the student was correct.  I had asked a quite reasonable academic question, but it was flawed in that the question made some implicit assumptions.  It was flawed in that although it was a good question, but it was not the right question.  It was not an impactful question.  It was not a question that would challenge to the proper degree.  It was not a question that would lead to the core of the issue.  The question was flawed. 

How often do we ask a flawed question?  In risk how often do we ask a flawed question that produces correct, but flawed answers as a result of the flaw in the question? 

The student got a good mark for their response.

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