by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
As part of my preparation to teach a seminar on advanced investment techniques, I have been reading up on what the latest is in the field of venture capital. In going through old interviews and notes I had compiled the one thing that struck me about venture capitalists that being their desire to have someone leading the company who is flexible. Every venture capitalist hates to have someone who is overly passionate about an idea. An overzealous entrepreneur is likely someone who will not be willing to change course when things inevitably do not go as planned. It is considered far better from the VC’s point of view to have someone who has a general idea, rather than a fully articulated plan that they are determined to stick with through thick and thin.
I believe there is a lesson here for risk managers. As a profession we tend to be like over-planned overzealous entrepreneurs who demand to have every detail thought out in advance. While planning is obviously a necessity, it is possible to over-plan. It is also possible to be overly committed to a plan. That goes for a business plan or for a risk plan. Things will happen. Things will change. Assumptions will prove to be incorrect. Economic shifts will happen. When the inevitable happens, commitment to a plan can be just as costly as not having had any kind of plan at all in place. Just like a venture capitalist, you need to learn to know when and how to be flexible.
Now if we could only get regulators to understand that point.
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