By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc. Steve Lindo, who is a risk expert with extensive experience in risk management, recently wrote a very interesting paper in the Journal of Risk Management in Financial Institutions. The title of the paper is “Risk Management Infrastructure as a Living Organism”[1] In his paper, Steve creates the analogy that risk management in a financial institution is like one of the body’s critical systems. To quote the abstract, “This paper examines the essential elements of risk management infrastructure in a financial institution using another complex, intelligent, adaptive organism as an analogy – the human anatomy.” There are many things to like about this paper, and in particular the fact that it points out that risk management and the management of financial institutions is a complex task (as opposed to a complicated task). This implies that you need to treat risk management and strategy in a holistic manner. You cannot fix solely the heart if it causes the nervous system to malfunction. However the main thing I like about this paper is that it uses an analogy from another field – namely anatomy. As risk managers we have a lot that we can learn and use from examining how other fields of practice handle similar issues. Using analogies helps one to see things in a slightly different way, and that in turn leads to breakthroughs. The types of problems in risk management also exist in other fields. The use of more analogies like Steve Lindo uses will help us in risk management to learn better, faster and more efficiently. [1] S. Lindo, 2013, “Risk Management Infrastructure as a Living Organism”, Journal of Risk Management in Financial Institutions, Vol 6, 1, 67-74
Partner, RSD Solutions Inc. Steve Lindo, who is a risk expert with extensive experience in risk management, recently wrote a very interesting paper in the Journal of Risk Management in Financial Institutions. The title of the paper is “Risk Management Infrastructure as a Living Organism”[1] In his paper, Steve creates the analogy that risk management in a financial institution is like one of the body’s critical systems. To quote the abstract, “This paper examines the essential elements of risk management infrastructure in a financial institution using another complex, intelligent, adaptive organism as an analogy – the human anatomy.” There are many things to like about this paper, and in particular the fact that it points out that risk management and the management of financial institutions is a complex task (as opposed to a complicated task). This implies that you need to treat risk management and strategy in a holistic manner. You cannot fix solely the heart if it causes the nervous system to malfunction. However the main thing I like about this paper is that it uses an analogy from another field – namely anatomy. As risk managers we have a lot that we can learn and use from examining how other fields of practice handle similar issues. Using analogies helps one to see things in a slightly different way, and that in turn leads to breakthroughs. The types of problems in risk management also exist in other fields. The use of more analogies like Steve Lindo uses will help us in risk management to learn better, faster and more efficiently. [1] S. Lindo, 2013, “Risk Management Infrastructure as a Living Organism”, Journal of Risk Management in Financial Institutions, Vol 6, 1, 67-74
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