By
Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
Partner, RSD Solutions Inc.
What if
there was no risk regulation? What if
your organization did not have a risk department, nor had any mandatory risk
reporting? What would change?
Ironically
it is quite possible that your organization’s risk management would get
better. I have written before quite
extensively on risk homeostasis, but to bring it down to earth and out of the
fancy terms, consider crossing by either jaywalking in between intersections or
crossing at the crossing signal at the intersection. In which situation are you paying the most
attention? In which situation are you
more risk aware? In which situation are
you more risk “alive”?
In his popular
book David and Goliath, author Malcolm Gladwell talks about the “inverted U”
effect. The inverted U effect is when
adding an element (in our context risk management) has an initial benefit. However, adding more of the effect starts to
have diminishing gains and then adding more starts to produce negative
effects. Too much is often worse than
none at all.
A trivial
example is ice cream. Having a half
scoop of ice cream is better than just having a quarter scoop. Likewise having a full scoop is better than
half a scoop. However, having to eat 50
scoops of ice cream is likely to make you very sick and wishing you had never
even heard of ice cream.
So I ask again; What if there was no risk
regulation? What if your organization
did not have a risk department, nor had any mandatory risk reporting? What would change? Has your organization gone past the point of
the inverted U?
