Objective

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

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In many of the corporate risk management workshops I conduct, I generally start with two questions: (1) What is Risk? and follow that up with (2) What is the Objective of the Risk Management function? 

For the first question I often get something of the form “risk is something bad occurring”.  As readers of my blog know, I believe this is not a great answer, but admittedly it is by far the most common answer.  (I believe that a more useful and valuable definition of risk is “risk is the possibility that bad or good things may happen”)

While conformity may be the norm for answering the first question, there is generally much debate and one might even say confusion about how to answer the second question.  Some common answers are that risk is a regulatory function (ouch!), or that risk management is a baby-sitting function (ouch again!).

The truth is that many companies do not have a well-defined objective for the risk management function.  Without a well-defined objective, how is the risk management function supposed to add value?  In fact one cannot even answer the important question of whether risk management should be a cost centre or a value centre.  (I strongly believe that for most companies that risk management should absolutely be a value added centre.) 

So the question of truth becomes “does your risk management function have a well-defined objective?”  After all, we all know the statement that “if you don’t know where you are going then any path will take you there”.

Communication Versus Information

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

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It is always interesting for those of us of a certain age to watch the younger generations communicate.  Texting, tweeting, posting, Instagramming, emailing etc. – all of course are forms of passing information on to others, either individually or to groups, or to whomever happens to be on the receiving end.

However, have you ever thought about the difference between communication and passing on information?  Is there a difference?  I certainly think so.

In my mind, information is simply data of some form or other.  Communication however conveys meaning – and more accurately two way meaning.  Information may be the latest sales figures, the number of on time deliveries, the location and time of the next group meeting, or simply a snapshot of what someone had for lunch. 

Communication however is a dialogue – a true dialogue with nuances and unspoken or written meanings.  Communication also involves feedback for understanding, inspiration and perhaps even motivation for action.

So the next time you begin a PowerPoint presentation, consider whether you are informing or communicating.  The next time you text versus phone, consider whether you want to inform or communicate.  And the next time you create a risk report, consider whether it is better to inform or to communicate. 

Plans Versus Spontaneity

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

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By the time this gets posted, my wife and I will be back from our vacation to Iceland.  While we bought several guidebooks, and solicited advice from friends who have been there, the reality is that my wife and I do relatively little planning when we go on a trip for pleasure.  While we inform ourselves of the major options for sightseeing and activities at our destination, we generally only have the loosest of ideas of what exactly we are going to do when we arrive.

Many of our friends are horrified at our lack of vacation planning.  They wonder how we will ever be able to maximize our experience.  They assume that we must be the laziest organizers in the world – which may actually be accurate when it comes to my attitude towards vacation planning, but certainly not a label that would apply to my wife.

The reality is that my wife and I are comfortable with the risk of going on vacation with only a very limited planned itinerary.  We like the spontaneity that a minimum of planning allows for and conversely we dislike being locked into an agenda as we know our minds on activities might change given the context.

So far it has worked out very good for us – and this will be our 30^th annual “Honeymoon Vacation” together.  However it is not the lack of planning that has led to our successful trips, but our willingness to embrace risk and uncertainty. 

Just another reminder that risk and uncertainty are not bad, but actually good if you know how to embrace and manage them.