*/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
Wednesday, July 9, 2014
Monday, July 7, 2014
Imagination
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
In risk management, I will argue that imagination is as important, if not
more important than risk knowledge. Risk knowledge is almost always looking
backward; it is based on what happened in the past. Imagination is forward
looking; it is based on what might happen. There is obviously a link
between the two in that what happened is often, but not always, a precursor
to what might happen. However, almost always the future is never quite like
the past and often it is understanding the differences that matter most.
An imagination allows what I (not so humbly) call Nason's First Law of Risk
Management to work its invisible magic. Nason's First Law of Risk
Management states, "The recognition of a risk automatically increases the
possibility and magnitude of the risk occurring if it is a good risk, while
also decreasing the probability and severity of it occurring if it is a bad
risk".
Risk management should be forward looking and not backward looking. To look
forward, one must imagine.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
In risk management, I will argue that imagination is as important, if not
more important than risk knowledge. Risk knowledge is almost always looking
backward; it is based on what happened in the past. Imagination is forward
looking; it is based on what might happen. There is obviously a link
between the two in that what happened is often, but not always, a precursor
to what might happen. However, almost always the future is never quite like
the past and often it is understanding the differences that matter most.
An imagination allows what I (not so humbly) call Nason's First Law of Risk
Management to work its invisible magic. Nason's First Law of Risk
Management states, "The recognition of a risk automatically increases the
possibility and magnitude of the risk occurring if it is a good risk, while
also decreasing the probability and severity of it occurring if it is a bad
risk".
Risk management should be forward looking and not backward looking. To look
forward, one must imagine.
[1] https://twitter.com/rsdsolutions
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