Rick Nason, PhD, CFA
Partner, RSD Solutions Inc
In a previous blog (Risk Test http://tinyurl.com/4fwypha) I talked about setting up a risk test for your risk function. I asked what type of questions would be on that test and how you would determine what a passing score would be.
Obviously very few companies will set up a test for their risk function (much less any other part of the organization). However there is a disturbing fact that would come out if they did. That disturbing fact is that most of the tests would likely be full of definitions. In other words the questions would go like “Define how this organization standardizes risk tolerance”, or “What is the company’s risk philosophy?”, etc. etc.
I suspect that a company’s risk test would have very few concepts or very little in the way of testing whether or not risk people actually understood risk, and most of it would be on corporate policies and definitions. Inefficient, ineffective and sad I think.
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