by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
Gold medal Olympians for the most part go on to fame and fortune. We remember their names and they are paraded before us all as heroes, and justifiably so. Silver medalists less so, and bronze medalists even less. Fourth place finishers barely get mentioned and those who finish fifth or below are quickly forgotten after the pre-Olympic hype is over. However the difference between first and last can literally be fractions of a second, or a minute amount of performance. The Olympics are a winner take all series of events. Perfection is needed for success, and anything less than perfection is relegated to the hazy memory pile and quickly forgotten. Finishing off the podium is often considered to be Olympic failure.
We often treat risk management as a winner take all event. The thinking is frequently that risk management needs to be perfect in order to be successful. The tragedy of this is that it is not possible to be perfect in risk management. It is not possible to be even close to perfect in risk management. Striving for perfection only leads to missed expectations and frustration. However being good, and trying to always be better, will lead to a strong competitive advantage, and the equivalent of a gold medal performance.
Not being on the risk management podium is not failure. However just striving to be an Olympic quality competitor in risk management does almost automatically put you on the podium. It is concentrating on being perfect, or not trying at all that makes you a risk management failure of Olympic proportions.
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