Changing Light Bulbs

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

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How many risk managers does it take to change a light bulb?  The straight
answer to this traditional joke setup is probably too many (and likely way
too many regulators).

There is a version of this old joke that you have probably heard many times
before.  "How many psychologists does it take to change a light bulb?" 
The punch line is "one, but the bulb has to want to change".  In risk
consulting we are often asked about changing the risk culture of a firm. 
There are many excellent ways to go about doing so, but the factual and
non-funny answer is that the firm must first want to change its risk culture.

The sad reality is that many firms do not want a risk culture, much less
change their existing risk culture (except to eliminate whatever risk
management they have in practice).  All change however must first be
preceded by a willingness to change, and this is especially true for risk
culture.


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Risk Experience

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

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Many corporations spend a lot of time focusing on the customer experience,
and rightly so.  Think of Starbucks, McDonalds, Mercedes Benz, or Disney. 
The experience is often more important than the actual product.  In your
organization, what is the risk experience?  What is the risk experience of
the employees, the Board, the suppliers, the customers, the regulators, the
investors or even society at large?


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Diversity

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

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Diversity is a major topic in corporations and in society at large.  We
recognize the importance and value of diversity for many reasons.  In risk
management I see many institutions that have a problem with risk diversity. 
The problem is not that risk management does not hire people with racial or
gender diversity though.  The problem is intellectual diversity.  More and
more staff in risk management departments all have similarities in training,
certifications, and mindsets.  Racial and gender diversity is important, but
intellectual diversity is also important – and especially important in risk
management.


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

Distributions

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

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Distributions play a central role in risk management.  We look at
distributions to calculate Value at Risk, Credit Risk, Foreign Exchange Risk,
Cash Flow Risk etcetera, etcetera, etcetera.  It is all part of the
increasing quantification and measurement of risk and risk exposures. 
However what we sometimes forget (perhaps conveniently) is that most of the
really important risks such as Strategic Risk, Reputational Risk, Paradigm
Shifting Risk, Cyber Risk or Catastrophic Risk do not have convenient
distributions.  The wise risk manager respects distributions but also
respects the limits of distributions – especially where they do not apply.


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

Design

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

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How many designers does your risk department have?  None you say!  How much
of the curriculum of risk programs is based on design factors?  Next to none
you respond!  When was the last time someone said "I really like the
design of this risk tool."  Are you now laughing?

To be useful, risk systems must be used, and furthermore they must be seen as
being easy to use.  A lack of focus on design leads to clumsy risk systems
and practices that go underutilized.  A little design can go a long way
towards the success and uptake of anything – and this includes risk
management.


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