by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
We have all heard the saying, “the exception that proves the rule”. I have to admit that I have never really grasped the meaning of this statement, although I realize it is always said when there is a clear exception to a rule.
In risk we always have to deal with exceptions. In fact I would argue that exceptions are the rule of risk management. Without exceptions there would not be a field or an industry of risk management. Without exceptions we would not have schools or degrees in risk management. Without exceptions I would have to find something else to blog about.
The tough question of risk management however is how do we deal with exceptions. How do our risk models incorporate exceptions? The toughest question of all perhaps is deciding when to abandon the risk protocol for an exception – in essence deciding when an exception is exceptional (assuming that is not an oxymoron).
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