*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
Risk can be quantifiable or unquantifiable. In other words, there are risks
that we can more or less objectively measure and there are risks that we can
only guess at their likelihoods and impacts.
I would argue that the vast majority of the important risks of an
organization (the risks that have a big impact both positively and
negatively) are unquantifiable. Yet it is obvious that we spend the most
time measuring and managing the quantifiable risks.
Legendary management consultant Peter Drucker stated that "what gets
measured, gets managed". I don't think he meant that statement to mean
"what gets measured should get managed".
[1] https://twitter.com/rsdsolutions
1 comment:
Resilience to major risk events - or even opportunistic exploitative capabilities for when such events occur (when, not if) - is often developed using a combination of:
a) incremental responses to lessons learned from less severe events
b) envisioning and preparing for multiple scenarios without being constrained by worst/best cases from the past
We tend to forget that the worst that happened was the worst BECAUSE it never happened before - and metrics are often developed AFTER an event that points us to what "needs to be measured".
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