Friday, May 25, 2012

Donuts

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

My favorite is old-fashioned chocolate dipped cake donuts.  Unfortunately, and although I live in Canada – home of the most donut shops per capita – it is hard to find my favorite donut.  However this blog is not about the tempting afternoon coffee snack, but instead about the hole in the middle.

 

Most companies have professionals that are intuitively very good risk managers at the “ground level”.  These are front line operators and managers, who although they do not have risk manager in their title or their job description, intuitively and instinctively understand risk management as they go about their daily tasks and operations.

 

Most companies also have very competent risk managers.  These are the managers who do have risk manager in their title and risk management in their job description.  These are the people who design risk management systems and processes for the company.

 

Thus a company has great risk management at the ground level, and also has great risk management at the upper levels.  The problem is often is the hole in the middle.  The hole in the middle is the lack of a connection between front line workers who understand the tasks and associated risks at hand (but not the strategic risk issues), and risk managers who understand the strategic risk issues and the associated portfolio mathematics (but not the ground level day to day operational issues).  A company needs to ensure this hole in the middle is filled efficiently.

 

 

Meanwhile, writing this blog has made me want a donut.  Perhaps I will get a jelly filled donut if they are out of old-fashioned chocolate cake donuts.

No comments: