Personality

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

There are a whole lot of talks, seminars, training courses, articles and
great thoughts about risk culture.  Culture can generally be described as
the social norms of the group.  In other words it is the usual behavior of a
group given the context.  Similar to, but subtly different from culture is
personality.  Personality, like culture, is a set of usual traits or
responses to a given context, but personality implies a more pliable and
flexible response.  A personality may change from day to day, while culture
changes slowly.  Personality is sometimes unpredictable, while culture is
almost completely predictable.  Personality has swings – culture does not
swing (except maybe in the 30's).

So in the final analysis should your organization worry about developing its
risk culture or should it worry about developing its risk personality? 

Formalism

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

There are many problems with risk management being a process.  (There are
also many advantages with risk management being process based.)  One of the
often overlooked problems is that a process creates groupthink.  It is hard
to be creative, to have different ideas, to develop a new paradigm or to see
the flip side if one is spending time and energy adhering to the corporate
risk manual.

Statistically Valid Noise

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

When I am wearing my academic hat – as opposed to my consulting hat – I
get so exasperated by my academic colleagues who willfully and purposefully
ignore a model or an idea, or conversely adopt a model or an idea, solely
based on the data available. 

As an example I had a colleague say to me today, "yes, we considered that
but we could only get 20 years of data and for our model to be statistically
valid we need at least twice as much data so we dropped that variable." 

I think every academic has heard (or said, or thought) something to that
effect in their career.  The reality is that you do need data to get
results.  However if you need so much data for statistical significance,
then perhaps you should consider if you are measuring a model or just
measuring noise.  That is what I love about risk managers (and regulators)
– they never make that mistake!

J. Tukey

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

Just a quote from J. Tukey. 

"Far better an approximate answer to the right question, which is often
vague, than an exact answer to the wrong question, which can always be made
precise"