Tuesday, May 24, 2016

Fears

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
It was Franklin D. Roosevelt who famously said that we “… have nothing to fear but fear itself”.  The same might be paraphrased today as “we have nothing to fear but the regulation of fear itself”.
Fear is a powerful motivating tool, and likely fear is used as a sneaky political trick in many organizations to justify expansions of processes designed in part to mitigate risk and the risk of fear.
One factor that is often ignored is that many people seem to actually like to live in a state of fear.  As a trivial example consider all of the successful horror movies, or the attraction of ever more stomach churning roller coasters.  In the corporate world fear is also attractive to the psyche of many people as it allows them to justify their existence.  If the sky is perpetually falling, then they must be perpetually in place to keep it up.
Ultimately though making decisions out of fear is generally suboptimal.  Furthermore, fear is not risk and neither is risk equivalent to fear. 
There is a critical difference between being fearful of risk, and being respectful of risk.  Professional risk managers embrace and manage risk; amateurs fear risk.

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