Trust

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

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I believe that much of risk management is about issues of trust.  If you think about it, most risk management procedures are put in place because those who think that they know better do not trust others to do the right thing. 

Sometimes this lack of trust makes sense as the right thing may be counter-intuitive.  For instance almost every parent on a plane would have the instinct to make sure their child can breathe if the oxygen mask deploy and thus put the mask on their child first, rather than on themselves first.  However this would be imprudent because if the parent becomes incapacitated then they will be unable to help both themselves as well as their child.

However most of the time the right thing to do is the intuitive thing, and if you place your trust in people then they will indeed do the right thing.  However the trust is often put into the risk management system instead.  Not trusting people, and instead trusting a system is demeaning to people – particularly in a corporate setting.  The way risk management systems are sometimes enforced makes employees feel like children.  This is obviously not effective nor is it desirable on many different levels.

I believe that if you trust people to do the right thing that they will indeed make mistakes, but I also believe that if you trust them to do the right thing they will make far fewer mistakes, and they will indeed be mistakes and not outright sabotage.

Rigor

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

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I am an admittedly big fan of Seth Godin and his writings – particularly his blogs.  However earlier this week, in a blog titled “Rigor”, I believe he was inexcusably off-track.  Seth Godin wrote “Rigor is a focus on process.”  With this I have no problem.  His next sentence however got me to sit up and eject an enthusiastic “Bullshit!”  The offending sentence and more specifically the offending second clause was; “Paying attention to not just how you do things, but why.”  The “but why” struck me as offensively wrong – particularly when it comes to thinking about rigor in risk management.

In my experience, the vast majority of people who have an allegiance to rigor have an inversely proportional understanding of why they should be so rigorous.  Rigor in risk management I find is often used as a shield to hide the fact that no one can put forward a coherent explanation for the why of the process.   

In this age of regulation commingled with risk management, we need to be more rigorous about understanding – and constantly questioning – the why, than being rigorous about the process.  Furthermore rigor needs to be rigorously matched to the appropriate why because the wrong rigor for the wrong why is the worst form of risk management there is.

Problems

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

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The psychiatrist Theodore Isaac Rubin wrote “The problem is not that there are problems.  The problem is expecting otherwise and thinking that having problems is a problem.”  In an age when every slip is seen as a failure of risk management, it is wise and useful to keep Rubin’s statement in mind