Case Studies

 

*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*

As most people know, I am also a Business School professor as well as a risk
management consultant.  One of my favorite teaching methodologies is the
case method.  The case method forces students to think rather than just know
things – which in business and in risk management is a critical distinction
to keep in mind.

I was taught a very specific method for working through case studies, and it
is very applicable to risk management.  The method, or process, is to first
define the problem.  Most students immediately jump in and start the
analysis by crunching numbers or developing strategy maps.  That is putting
the cart before the horse.  The second step is to determine the focus.  In
other words, from whose focus are you going to work through the case?  Note,
that in determining the focus it is quite possible that you will be forced to
change the problem statement, as the problem is very likely focus dependent.

Most students appreciate that this might be a good thing to do, and then they
start the analysis.  However, the next step in the process is still not to
start the analysis.  It is to define the criteria by which you will choose
the optimal solution.   Before you have the decision making criteria, you
will not know what analysis to do.  Again, the cart would be before the
horse.  So often students start the analysis without first thinking about
the criteria, and as a result a faulty portfolio of analytical techniques
leads to a sub-optimal solution.

The next step is – you guessed it – is still not to start the analysis. 
To prevent biases, and to prevent getting locked into an answer before you
have done the proper due diligence, you need to develop a list of
alternatives.  After a good list of alternatives is developed, */then/* you
can start the analysis.

In risk management we too often start with the analysis without a recognition
of (a) the problem, (b) who (or what) the focus of the problem is centered
around, (c) what the criteria will be for choosing a solution or decision, or
(d) what the full list of possible alternatives are.  Risk management needs
to take a page from B-school basics.