Risk as a Craft

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

Is risk management a craft?  Should we have a guild and apprenticeships?  Can risk management be codified, or is risk management one part science, one part art, and one part intuition gained through extensive experience?

 

I believe that risk management is a craft.  Despite the prevalence of risk management programs I believe that you only learn risk management through experience.  (Yes – I design and instruct in several different such programs at the undergraduate, graduate, executive education levels and in many different professional programs).

 

I am obviously biased in making that statement.  Our company RSD Solutions after all is formed on the backbone of professionals with extensive experience who have been there and done that.  Based simply on credentials there are many other directions we could have chosen to go into – but we chose risk management based on our experience.  That is an important and significant difference.

 

Often risk managers are chosen based on credentials.  Credentials are important, but credentials are only starting points.  Credentials are only starting points for gaining the sufficient experience necessary in order to be eventually claimed a craftsperson.  It is time for the profession to start to act as a craft, and less as a science – with all of the implications this implies.

 

Risk Managers in Conversation

Contributed by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

 

From the July 5, 2011 Wall Street Journal, Pepper and Salt Column.  No need to write anything else.  All is self-explanatory.

 

 

Jazz and Bowling

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

Seth Godin a while ago (September 12, 2010) asked the question “Why jazz is more interesting than bowling” in his blog.  A strange but a very interesting question.  Before you sign off of this blog, I want you to risk 40 seconds of your life to read Seth’s blog in its entirety, and then ask yourself a simple question that I pose below.  

Why jazz is more interesting than bowling

Bowling is all about one number: the final score. And great bowlers come whisker-close to hitting the perfect score regularly. Not enough dimensions for me to be fascinated by, and few people pay money to attend bowling matches.

Jazz is practiced over a thousand or perhaps a million dimensions. It's non-linear and non-predictable, and most of all, it's never perfect.

And yet...

when we get to work, most of us choose to bowl.

Interesting little blog isn’t it?  Now you are probably asking yourself, “Why did Rick include this in a risk blog?”  The answer is that I wanted to ask you; “when you go to work as a risk manager, are you bowling or jazzing?”

 

Here is the link to the blog which I have pasted below in its entirety. http://sethgodin.typepad.com/seths_blog/2010/09/why-jazz-is-more-interesting-than-bowling.html 

 

Risk as a Craft

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

Is risk management a craft?  Should we have a guild and apprenticeships?  Can risk management be codified, or is risk management one part science, one part art, and one part intuition gained through extensive experience?

 

I believe that risk management is a craft.  Despite the prevalence of risk management programs I believe that you only learn risk management through experience.  (Yes – I design and instruct in several different such programs at the undergraduate, graduate, executive education levels and in many different professional programs).

 

I am obviously biased in making that statement.  Our company RSD Solutions after all is formed on the backbone of professionals with extensive experience who have been there and done that.  Based simply on credentials there are many other directions we could have chosen to go into – but we chose risk management based on our experience.  That is an important and significant difference.

 

Often risk managers are chosen based on credentials.  Credentials are important, but credentials are only starting points.  Credentials are only starting points for gaining the sufficient experience necessary in order to be eventually claimed a craftsperson.  It is time for the profession to start to act as a craft, and less as a science – with all of the implications this implies.

ASRS,… (?)

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

 

Don’t you just love it when people throw around acronyms like “ASRS” and just assume you know what the heck they are talking about?  I don’t, but I wanted to get you riled up so you would read this post.  Hopefully my tactic worked.

 

ASRS stands for “Aviation Safety Reporting System”, and it is the system to report “near-misses” of aviation accidents.  Kim Vicente in his multiple award winning book “The Human Factor: Revolutionizing The Way We Live With Technology” (Vintage Canada, 2004), describes the ASRS and outlines the attributes of this database that make it so effective for airline risk management.

 

·         Reports are de-indentified so blame cannot be assigned and there can be no retribution.  This increases the likelihood of reports being submitted and being submitted accurately and completely. 

·         The reports are voluntary and confidential.  Anyone can file a report.

·         Reports are analyzed by experts who are generally retired pilots.  This means that the reports are analyzed by people who understand the context of flying, and the fact that they are retired means they can look at the issues objectively.

·         The goal is to “find out what’s to blame, not who’s to blame” (emphasis is Vicente’s). 

 

Does your company have an “ASRS”?  Should your company (or industry) have an ASRS?  Can you come up with a better acronym that will sound as mysterious as ASRS?

Doing nothing is not a strategy; Canadian exporters exempted

by Michael Arbow, MBA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

Recently Peter G. Hall, Vice-President and Chief Economist at the Canadian government’s Export Development Corporation stated in his weekly e-newsletter that when it comes to exporters dealing with the “soaring loonie” a survey showed that:

 

“(of the) current coping strategies, the largest group of respondents, at 28%, is simply riding out dollar movements. Cost-cutting is the preferred route for 20% of exporters, while 10% have a hedging strategy. At 7%, a small minority is having success passing on the cost of a higher dollar by increasing selling prices.”

 

So almost 50% of respondents are either effectively doing nothing or hoping that cost cutting in a commodity appreciating world will reduce the risk to their firm of feeling the pain of a strong Canadian dollar.  Cost cutting can work but sadly the costs being cut are probably adversely effecting moral, staff training or future market opportunities; as for “winging it”, that to may limit future growth and profitability. 

 

Why do so few firms go with a hedging (arguably the more sensible route for some) strategy?  The common reason we at RSD have found is a misunderstanding of the strategy or the lack of internal corporate skill sets and the discomfort of senior staff acknowledging this.  Is that where your firm stands?  And is that really a justification for doing nothing or slashing and burning operations to effectively stand still?

Canada Day: A celebration of up-side risk

by Michael Arbow, MBA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

Today (July 1^st) is Canada’s 144^th birthday and I like many other Canadian’s and those who endorse what Canada represents will be celebrating across the world.  We celebrate a great country that is currently and for the foreseeable future in a “sweet spot”; Canada has a stable government, banking and legal system which immigrants and investors love.  As a country we are also lucky to have food, energy and fresh water all in quantities greater than our 33 million or so people can consume. 

 

While we celebrate all those benefits; we are also celebrating up-side risk.  John A MacDonald and his contemporaries, who created Canada, surely saw downside risk in creating a country as vast and under-populated as Canada was in the agrarian nineteenth century but they didn’t let this over-ride their belief in the benefits of one Dominion.  By clinging to their convictions of the up-side risk, Canada was born and happily their vision continues to live on, grow and prosper.

 

Happy Birthday Canada and to our readers in Canada – have a great long weekend.