*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
Risk can be quantifiable or unquantifiable. In other words, there are risks
that we can more or less objectively measure and there are risks that we can
only guess at their likelihoods and impacts.
I would argue that the vast majority of the important risks of an
organization (the risks that have a big impact both positively and
negatively) are unquantifiable. Yet it is obvious that we spend the most
time measuring and managing the quantifiable risks.
Legendary management consultant Peter Drucker stated that "what gets
measured, gets managed". I don't think he meant that statement to mean
"what gets measured should get managed".
[1] https://twitter.com/rsdsolutions
Thursday, February 27, 2014
Wednesday, February 12, 2014
How to be a Complete and Utter Failure as a Risk Manager
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
Want to know how to be a complete and utter failure as a risk manager?
Here's a start:
1) Trust all numbers unconditionally and take them all at face value
2) Ignore wisdom, experience and critical thinking
3) Never ask questions
4) Don't bother to build a team of experts. Become an expert in each
area yourself
5) Ignore small probability events
6) Financial markets are irrelevant and / or frequently wrong and thus you
do not need to watch them
7) Realize that history is irrelevant. Likewise, realize that all history
is totally relevant.
(With apologies to Steve McDermott.
http://www.amazon.com/Complete-Utter-Failure-Life-Everything-ebook/dp/B004MMEIZK/ref=sr_1_1?ie=UTF8&qid=1391716427&sr=8-1&keywords=how+to+be+a+complete+and+utter+failure+in+life
[2] )
[1] https://twitter.com/rsdsolutions
[2]
http://www.amazon.com/Complete-Utter-Failure-Life-Everything-ebook/dp/B004MMEIZK/ref=sr_1_1?ie=UTF8&qid=1391716427&sr=8-1&keywords=how+to+be+a+complete+and+utter+failure+in+life
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
Want to know how to be a complete and utter failure as a risk manager?
Here's a start:
1) Trust all numbers unconditionally and take them all at face value
2) Ignore wisdom, experience and critical thinking
3) Never ask questions
4) Don't bother to build a team of experts. Become an expert in each
area yourself
5) Ignore small probability events
6) Financial markets are irrelevant and / or frequently wrong and thus you
do not need to watch them
7) Realize that history is irrelevant. Likewise, realize that all history
is totally relevant.
(With apologies to Steve McDermott.
http://www.amazon.com/Complete-Utter-Failure-Life-Everything-ebook/dp/B004MMEIZK/ref=sr_1_1?ie=UTF8&qid=1391716427&sr=8-1&keywords=how+to+be+a+complete+and+utter+failure+in+life
[2] )
[1] https://twitter.com/rsdsolutions
[2]
http://www.amazon.com/Complete-Utter-Failure-Life-Everything-ebook/dp/B004MMEIZK/ref=sr_1_1?ie=UTF8&qid=1391716427&sr=8-1&keywords=how+to+be+a+complete+and+utter+failure+in+life
Monday, February 10, 2014
Retirement
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
A relatively recent article in The Guardian / The Observer (January 12,
2014), discussed the organization Edge.org, or also known as the Reality
Club. Each year it provides a forum for leading thinkers to respond to a
given question. The question for this year was "What Scientific Idea is
Ready for Retirement?"
What a great question. It is also a great question for risk management.
Although the field of risk management as a discipline is still relatively
young (actually an infant depending on how far back you want to trace the
roots of it) there are several ideas I can think of that might be ready for
Shady Acres Retirement Home!
I would like to hear your ideas to this.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
A relatively recent article in The Guardian / The Observer (January 12,
2014), discussed the organization Edge.org, or also known as the Reality
Club. Each year it provides a forum for leading thinkers to respond to a
given question. The question for this year was "What Scientific Idea is
Ready for Retirement?"
What a great question. It is also a great question for risk management.
Although the field of risk management as a discipline is still relatively
young (actually an infant depending on how far back you want to trace the
roots of it) there are several ideas I can think of that might be ready for
Shady Acres Retirement Home!
I would like to hear your ideas to this.
[1] https://twitter.com/rsdsolutions
Friday, February 7, 2014
Sheldon versus Warren
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
I am preparing a presentation for the Atlantic Canada CFA Valuation
conference, which is being held this coming Friday and Saturday. The title
of my talk on rationality in finance is "Dr. S. Cooper vs Mr. W.
Buffett". In one corner we have cold hard rationality and in the other
corner we have warm and fuzzy common sense. In investment I think we all
know who wins. In risk management I also think we all know who wins, but we
are probably too afraid to admit it. Rationality 0, Common Sense 2.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
I am preparing a presentation for the Atlantic Canada CFA Valuation
conference, which is being held this coming Friday and Saturday. The title
of my talk on rationality in finance is "Dr. S. Cooper vs Mr. W.
Buffett". In one corner we have cold hard rationality and in the other
corner we have warm and fuzzy common sense. In investment I think we all
know who wins. In risk management I also think we all know who wins, but we
are probably too afraid to admit it. Rationality 0, Common Sense 2.
[1] https://twitter.com/rsdsolutions
Wednesday, February 5, 2014
Punxsutawney Phil
*/by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
Punxsutawney Phil, that superstar of Groundhog Day has arisen from his burrow
and done whatever the heck it is that he does for the TV cameras and the
media and thus our forecast for an early or late spring is set. Complete
unmitigated foolishness and all done in good fun you say. Surely no one
believes that whether or not a groundhog sees his (her) shadow on a given day
each year could possibly have any forecasting ability whatsoever. That is
very likely true, but have you noticed how much media attention it gets each
year? In fact, I bet it was a top story on your local TV news (likely you
even have your own local version of Punxsutawny Phil – here it is
Shubenacadie Sam).
It is all very much ado about nothing. But if so, why does the media make
such a big fuss about it each year? Groundhog Day is a quaint reminder
perhaps of a simpler time when people had hopes and dreams about being able
to forecast things such as if spring was going to come early or late this
year. But how much of your risk reporting and prediction reporting is
equally quaint and based on more superstition than fact? How much of your
risk reporting and discussion is much ado about nothing? For instance, how
much does a change in your institution's VAR actually equate to realized
changes in risk? Where are the Punxsutawney Phil's in your organization?
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
Punxsutawney Phil, that superstar of Groundhog Day has arisen from his burrow
and done whatever the heck it is that he does for the TV cameras and the
media and thus our forecast for an early or late spring is set. Complete
unmitigated foolishness and all done in good fun you say. Surely no one
believes that whether or not a groundhog sees his (her) shadow on a given day
each year could possibly have any forecasting ability whatsoever. That is
very likely true, but have you noticed how much media attention it gets each
year? In fact, I bet it was a top story on your local TV news (likely you
even have your own local version of Punxsutawny Phil – here it is
Shubenacadie Sam).
It is all very much ado about nothing. But if so, why does the media make
such a big fuss about it each year? Groundhog Day is a quaint reminder
perhaps of a simpler time when people had hopes and dreams about being able
to forecast things such as if spring was going to come early or late this
year. But how much of your risk reporting and prediction reporting is
equally quaint and based on more superstition than fact? How much of your
risk reporting and discussion is much ado about nothing? For instance, how
much does a change in your institution's VAR actually equate to realized
changes in risk? Where are the Punxsutawney Phil's in your organization?
[1] https://twitter.com/rsdsolutions
Friday, January 31, 2014
An Astronaut’s Guide to Life On Earth
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
I just finished reading Chris Hadfield's book "An Astronaut's Guide to
Life On Earth". It was a Christmas present to me from my youngest
daughter, and it is a fantastic read. Chris Hadfield for those of you who
don't know (which would mean the non-Canadian reader's of my blog) is a
Canadian Astronaut who served as Commander of the International Space Station
in 2013. He might be best known for his YouTube video Space Oddity
http://www.youtube.com/watch?v=KaOC9danxNo [2] which has over 20 MM views.
For risk managers there are wonderful lessons from space outlined in this
book that can be adapted to the organization. In fact I am going to make
the book a feature reading for a seminar in my Enterprise Risk Management
class. Read it and see if you do not agree with me. A very engaging book,
but also a very educational book for the risk manager.
[1] https://twitter.com/rsdsolutions
[2] http://www.youtube.com/watch?v=KaOC9danxNo
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
I just finished reading Chris Hadfield's book "An Astronaut's Guide to
Life On Earth". It was a Christmas present to me from my youngest
daughter, and it is a fantastic read. Chris Hadfield for those of you who
don't know (which would mean the non-Canadian reader's of my blog) is a
Canadian Astronaut who served as Commander of the International Space Station
in 2013. He might be best known for his YouTube video Space Oddity
http://www.youtube.com/watch?v=KaOC9danxNo [2] which has over 20 MM views.
For risk managers there are wonderful lessons from space outlined in this
book that can be adapted to the organization. In fact I am going to make
the book a feature reading for a seminar in my Enterprise Risk Management
class. Read it and see if you do not agree with me. A very engaging book,
but also a very educational book for the risk manager.
[1] https://twitter.com/rsdsolutions
[2] http://www.youtube.com/watch?v=KaOC9danxNo
Thursday, January 30, 2014
Einstein was Wrong
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
Einstein is famous for having said that "Insanity is doing the same thing
over and over again and expecting a different result". That quote is only
true when things are complicated. However, most things in business and in
risk are complex. When things are complex, then the opposite is true and
insanity is doing the same thing over and over again and expecting the same
result.
If you are new to complexity, or forgot the difference between a complex
system and a complicated one, check out my article in the RMA a few years
back titled "It's Not Complicated". Here's the link
http://www.rsdsolutions.com/quotit039s-not-complicatedquot-article-rick-nason-rma-journal-march-2011
[2]
Alternatively you may wish to listen to the associated Tedx talk. That link
is here. http://www.youtube.com/watch?v=FQO_wxxinH4 [3]
[1] https://twitter.com/rsdsolutions
[2]
http://www.rsdsolutions.com/quotit039s-not-complicatedquot-article-rick-nason-rma-journal-march-2011
[3] http://www.youtube.com/watch?v=FQO_wxxinH4
Partner, RSD Solutions Inc./*
*/Follow us on Twitter/* [1]
Einstein is famous for having said that "Insanity is doing the same thing
over and over again and expecting a different result". That quote is only
true when things are complicated. However, most things in business and in
risk are complex. When things are complex, then the opposite is true and
insanity is doing the same thing over and over again and expecting the same
result.
If you are new to complexity, or forgot the difference between a complex
system and a complicated one, check out my article in the RMA a few years
back titled "It's Not Complicated". Here's the link
http://www.rsdsolutions.com/quotit039s-not-complicatedquot-article-rick-nason-rma-journal-march-2011
[2]
Alternatively you may wish to listen to the associated Tedx talk. That link
is here. http://www.youtube.com/watch?v=FQO_wxxinH4 [3]
[1] https://twitter.com/rsdsolutions
[2]
http://www.rsdsolutions.com/quotit039s-not-complicatedquot-article-rick-nason-rma-journal-march-2011
[3] http://www.youtube.com/watch?v=FQO_wxxinH4
Subscribe to:
Posts (Atom)