Understanding

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

*/Follow Rick Nason on Twitter [1]/*

*/Follow RSD Solutions on Twitter/* [2]

There is a lot of emphasis these days in understanding risk management
principles.  This has led to the proliferation of risk certification
courses, and risk certification designations.  As far as these goes they
have greatly increased the awareness of the importance of risk management –
and this is a good thing (to borrow from a former ubiquitous and famous
homemaker).  However a solid understanding is not enough.  Before risk
understanding can be applied, there must be a very solid business
understanding, and here arises a problem.

Most risk regulation, and a lot of risk management practices are based on
risk understanding, and not business understanding.  This is putting the
cart before the horse and leads to inefficiencies at best, and harmful risk
management at worst.

Business understanding should and must always come first.  Without solid
business understanding, risk management is a waste of time, resources and
effort.


[1] https://twitter.com/rnason_dal
[2] https://twitter.com/rsdsolutions