*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
I have had the material ready to write a blog about the inability of experts
to predict college sports and I was going to compare it to the inability to
predict risk events. As my example I was going to use the results of the
pundits at predicting the outcome of the College football bowl season (in
case you are interested the prediction ability is the same as flipping a
coin).
As I sat down today to write the blogs for the week, I desperately looked for
something that would distract me and allow me to procrastinate yet again.
And then it happened – I got a notice from the Wall Street Journal that
Warren Buffett (through Berkshire Hathaway) was backing a $1 Billion prize
for anyone who can fill out a perfect March Madness college basketball
bracket.
The sage of Omaha knows the odds against predicting the future are infinitely
small. What he may not realize is that the number of people willing to try
may be almost equally infinitely large.
The odds of predicting risks successfully are also infinitely small, but like
those who participate in an office pool for March Madness, the number who try
seems to be infinitely large.
[1] https://twitter.com/rsdsolutions
Friday, January 24, 2014
Thursday, January 23, 2014
Black Ice
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
I was visiting my sister who lives in New Brunswick Canada last week. It
is always nice to get back to the place I was born for a few days and spend
time with family. As part of the visit, I drove with my sister from
Fredericton to Saint John and back – a drive of about 200 kms in total.
Going from Fredericton to Saint John the road was clear, although the day
itself was overcast with a light rain. Normally that is cause for concern
but with the temperature an unseasonably warm plus seven degrees there was
little thought given to the roads freezing over – particularly as they were
plowed bare to dry pavement after the previous week's blizzard.
On the way back to Fredericton in the afternoon however it was a different
story. The trip started off okay, and the roads were clear. However about
halfway through the trip it became clear that the light rain was surprisingly
freezing to the road. To someone who is not familiar with black ice however
the road looked wet but ice free. Not true!
I dramatically reduced my speed, as did most other experienced drivers.
However many kept zipping along at normal highway speed – and you know how
this turns out. Ultimately the highway was closed as the number of
accidents climbed. Fortunately (miraculously) no one was hurt.
Black ice of course looks like pavement – except it is ice. It is very
clear and very slippery ice. Risk is often like black ice. Risk often
looks like a normal situation when in reality the situation has changed to be
very treacherous. It takes experience and a willingness to listen to your
intuition to know when the pavement has turned to black ice. Unfortunately
your car's traction control indicators will not know the difference until
it is too late. (Likewise your corporate risk management system will also
not notice the difference until it is too late.)
Black ice is tricky. Risk is tricky.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
I was visiting my sister who lives in New Brunswick Canada last week. It
is always nice to get back to the place I was born for a few days and spend
time with family. As part of the visit, I drove with my sister from
Fredericton to Saint John and back – a drive of about 200 kms in total.
Going from Fredericton to Saint John the road was clear, although the day
itself was overcast with a light rain. Normally that is cause for concern
but with the temperature an unseasonably warm plus seven degrees there was
little thought given to the roads freezing over – particularly as they were
plowed bare to dry pavement after the previous week's blizzard.
On the way back to Fredericton in the afternoon however it was a different
story. The trip started off okay, and the roads were clear. However about
halfway through the trip it became clear that the light rain was surprisingly
freezing to the road. To someone who is not familiar with black ice however
the road looked wet but ice free. Not true!
I dramatically reduced my speed, as did most other experienced drivers.
However many kept zipping along at normal highway speed – and you know how
this turns out. Ultimately the highway was closed as the number of
accidents climbed. Fortunately (miraculously) no one was hurt.
Black ice of course looks like pavement – except it is ice. It is very
clear and very slippery ice. Risk is often like black ice. Risk often
looks like a normal situation when in reality the situation has changed to be
very treacherous. It takes experience and a willingness to listen to your
intuition to know when the pavement has turned to black ice. Unfortunately
your car's traction control indicators will not know the difference until
it is too late. (Likewise your corporate risk management system will also
not notice the difference until it is too late.)
Black ice is tricky. Risk is tricky.
[1] https://twitter.com/rsdsolutions
Tuesday, January 21, 2014
Resolutions
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
It is the start of another year, and that means for many people another time
to make – and break – New Year's Resolutions. Almost always
resolutions are based on habits – and habits – despite what the self-help
section of the bookstore would have us believe are hard to break. Habits
are in part what make us human.
Corporations per se do not make New Year's resolutions, but they do set
goals and make yearly plans. More so many corporations take this time of
year to update their corporate mission statements. Increasingly a corporate
mission statement includes something about risk – particularly for
financial institutions.
Risk objectives however are like New Year's Resolutions. Risk arises
because business takes place in the realm of humans. Thus, risk in part is
based on habit, and corporate habits, just like personal habits are hard to
change.
Have you kept your New Year's Resolutions so far? Has your company kept
up with their risk practices for the year so far?
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
It is the start of another year, and that means for many people another time
to make – and break – New Year's Resolutions. Almost always
resolutions are based on habits – and habits – despite what the self-help
section of the bookstore would have us believe are hard to break. Habits
are in part what make us human.
Corporations per se do not make New Year's resolutions, but they do set
goals and make yearly plans. More so many corporations take this time of
year to update their corporate mission statements. Increasingly a corporate
mission statement includes something about risk – particularly for
financial institutions.
Risk objectives however are like New Year's Resolutions. Risk arises
because business takes place in the realm of humans. Thus, risk in part is
based on habit, and corporate habits, just like personal habits are hard to
change.
Have you kept your New Year's Resolutions so far? Has your company kept
up with their risk practices for the year so far?
[1] https://twitter.com/rsdsolutions
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