Habit

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

Another shower story – not for a nanosecond that I think that anyone wants
to dwell on my showering habits.  However I take my risk lessons where I
can.

In my morning shower, I suspect I have the same habits as most people.  Wet
the hair, shampoo, then conditioner, then body soap.  In a hotel however
your routines get adjusted.  In a hotel you have shampoo, conditioner, and
then shower gel, all in those stupid little bottles that make it difficult to
get what's inside to come out. 

In any case, I recently got into the hotel shower, and started the routine;
wet the hair, shampoo, and then conditioner.  Then came the time to wash the
body.  Using shower gel however, instead of soap, I instinctively, and
stupidly, put the shower gel in my hair.  No major worries, as I suspect
shower gel, soap and shampoo are basically all the same thing, simply
packaged differently so the personal body care companies can sell us more
product.  The problem was the gel washed the conditioner out of my hair,
which then made my hair that much more difficult to brush.  (Having very
fine long hair has its disadvantages.)

The point I want to make is that a lot of things we do solely out of habit. 
Good risk management recognizes this and accounts for this.  Bad risk
management ignores this very human element of our nature.

Great Design

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

I recently stayed in a very nice European hotel.  It was in a new upscale
hotel and everything was clean, modern and well designed.   Bit too well
designed in places.  Let me explain.

In the walk-in shower the faucets were lined up with the dial for hot / cold
on top, and the dial to turn on / off the water on the bottom.  In the
interest of design the two dials were identical, and had no markings or
identification symbols associated with them.  They were simply too very nice
looking dials.

It comes time to finish the shower and turn off the water.  Which dial turns
off the water, and which dial will turn the water either ice-cold or scalding
hot?  In the moment I cannot remember.  All of a sudden great design for
ascetics turns out to be crappy design in terms of function.  

Now here is the question; is your risk management design for ascetics or
function (or regulatory compliance)?

P.S.  In case you are wondering, I guessed wrong, and wound up with a very
cold ending to my shower.

Is your risk focus biased?

*/By Stephen McPhie
Partner, RSD Solutions Inc./*

Thinking way back a few years, I recall flying from London to Toronto a week
after 9/11, the first day flights resumed.  From a purely airport experience
it was the easiest journey through London's Heathrow airport I have ever
had.  Both Heathrow and Toronto airports were almost deserted.  Those
waiting for my flight to board were looking suspiciously and a little
nervously at the other passengers.  One man with a beard and obviously
Muslim was the subject, unreasonably, of most looks.

The 9/11 atrocity was clearly the foremost concern on most people's minds.
 Few, I suspect, were concerned about the possibility of structural failure
of the plane or by far the most likely cause of disaster, human error.  I am
sure that even fewer, if anyone, had given a thought to what was the greatest
risk to their lives by a magnitude, which was the drive to the airport. 

People were so focused on one risk that they were almost completely blinded
to the existence of other greater risks that were far more likely to
happen. 

I fly often and don't see it any differently than taking a bus (apart from
the time spent getting to airports and in lines at airports).  The only
slight concern I have is human error – principally by the pilot or
maintenance personnel – which I believe is by far the greatest cause of
plane crashes.  Terrorism is horrendous and tragic and gets the biggest
headlines.  Consequently, it is hard not to be acutely focused on it. 
However, it is very uncommon and kills relatively few people (no consolation
I know for those affected by it).

Is your organization so focused on one or more headline risks that other
factors of greater likelihood and effect are being paid scant attention?  Do
you constantly re-evaluate and question your risks?

Physics Meets Wall Street- Complexity in Business: Rick Nason at TEDxHalifax

View Rick's TED presentation by clicking on the following link:

http://youtu.be/FQO_wxxinH4 [1]


[1] http://youtu.be/FQO_wxxinH4

Winning Ugly

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

Recently I had an opportunity to see a friend`s daughter play in a regional
tennis tournament.  It brought back a lot of memories from when I also spent
my summers in tournament tennis.  The game has changed a lot from when I was
competitive, but the rules are still the same:  you have to find a way to
win.

My friend`s daughter is a very talented player and is obviously well
coached.  She has a significant amount of athletic talent, has excellent
strokes, is hard working, and very bright; perhaps a bit too bright and a bit
too talented on this given day.  Although she was clearly the better player,
and also highly ranked, my friend`s daughter fell behind in the match.  Her
opponent was in a groove, and also being well coached was ``playing up`` to
the talent of my friend`s daughter.  It seemed the better the tennis stroke
that my friend`s daughter hit, the better the return.  In essence, my
friend`s daughter was letting her opponent get into a groove.  What my
friend`s daughter didn`t notice is that her opponent was not dealing well
with shots that were hit short, or without pace, or shots that she did not
have to run all out for.  In other words, the opponent was having big
success against the best shots of my friend's daughter, but very little
success against my friend`s daughter`s poor shots.

If my friend`s daughter had simply started to play less elegant tennis she
probably would have won.  However she continued to play a very beautiful,
but ultimately losing game. 

Risk management is also like that sometimes.  In our efforts to be state of
the art, and to incorporate best practice, we defeat ourselves against
risk.  Instead of being content with ``winning ugly``, we prefer to lose
beautifully.  Few people remember who was best, they simply remember who
won.