ERM Course – I Need Your Help

Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com 

 

I am putting together a new Enterprise Risk management Course for my MBA students.  I would love to hear suggestions from my readers as to what I should include.  Any suggestions you have for readings, papers, topic suggestions would be most welcomed. 

 

I have put together now four major ERM courses and this will be my 5^th version where I have started from scratch.  The one interesting thing about teaching ERM is that the field is still so young and still rapidly evolving that each new version allows for a fresh look at things.  I look forward to hearing your suggestions.

 

Stupid Interview Question

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com 

 

Working with MBA students is always busy this time of year.  Students are in the final round of interviews and they are always anxious and looking for any advice they can get that will give them an edge.  To that end, I often see a fairly large number of students in my university office looking for interview tips.

 

Interviews have changed a bit since I was in the middle of looking for a job after graduation.  In my day an interview was assessing your skills and trying to ascertain if you were a likable person or not.  When I was interviewing, it was always a line manager that did the initial interviews, and they were often inconsistent in how they went about things.  Now it is human resource professionals who supposedly have much more systematic and objective interviewing techniques.  The goal now is to assess behavioural traits.  Competence and the ability to do a good job are on the list – but quite far down the list.

 

In my day interview questions were along the lines of what do you know, and what have you done.  Now that ask questions like “If you were a tree, what type of tree would you be?” I understand why they ask that type of question, but ultimately it has become such a common question (or style of question), that in my opinion it is just plain stupid.  I am not a tree, I have no immediate plans to become a tree, and if I was a tree I am quite confident that no one would want to pay me a salary.

 

That may be considered cynical however.  So just to show that I can be open minded, I will ask the question of risk professionals; “If risk management were a tree, what type of a tree would it be?”  That’s just stupid, but a hell of a lot of fun to discuss at the water-cooler!

Experience Precedes

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com

 

What do the books “The Inner Game of Tennis” (by Timothy Gallway) and “Managers Not MBAs” (by Henry Mintzberg) have in common?  The answer is that both argue in their own way that “Experience precedes technical knowledge”.

 

“Experience precedes technical knowledge” is a direct quote from the Inner Game – the best selling tennis book that was originally published in the 1970’s.  The argument is basically that you do not know much about playing tennis until you have picked up a racquet and hit some tennis balls.  Technical expertise is meaningless unless you have experience.  Mintzberg argues much the same thing when he essentially argues that MBA programs have limited effectiveness due to the limited experience of the students in business school.

 

This brings us to risk management.  The demands of quantitative regulation (regulation by means of quantitative measures) and the prominence of quantitative techniques for best practice in risk management has led to an emphasis on technical knowledge over experience.  In my opinion this puts the cart before the horse, and is as useful as hiring a PhD in tennis as your tennis coach, even though the person has never picked up a tennis racquet.

Bittersweet

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com 

 

My previous blog talked about the Graduation ceremony for the Dalhousie MBA class which I am one of the Professors for.  The ceremony was for the first graduating class of the newly designed Corporate Residency MBA, which is a one of a kind program that I am especially proud to be a part of.

 

The students who graduated basically all took a huge gamble on entering into a very innovative program.  As with anything new and in uncharted territory, the downside risk was huge, while the upside risk was also great.  Fortunately the upside risk prevailed and I believe – based on my experience with several other MBA programs over the years, and with my work with financial institutions on their intake programs – that we have one of the best MBA programs in North America.

 

The graduation ceremony was particularly bittersweet for me.  I was thrilled to watch the students walk across the stage and be awarded their degree.  I am also very excited thinking about the wonderful careers that they will have.  They are an exceptionally talented bunch – the best MBA cohort I have been associated with in nearly 20 years of graduate level teaching that I have done.  I was also slightly sad to see them go.  I know I will keep in touch with many of them, but not having the opportunity to daily debate topics with them will be missed.

 

Risk management should also be a bittersweet exercise.  Risk managers should see the upside in every situation and not just dwell on the downside.  Risk management is a two-way street, although too often we focus on trying to turn it into a one-way street to ruin.

 

Meanwhile I have a short period of time to rest up.  The next cohort will be here in just over a month.  I can barely wait to see how they will match up and am tremendously excited about the thrills of working with them.

Graduation

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.RSDsolutions.com

info@RSDsolutions.com 

 

Recently the convocation for the MBA program at Dalhousie University where I am an Associate Professor of Finance was held.  Graduation is always a big day; as students celebrate their success at getting through the program and excitedly start their working careers.

 

Convocations also bring about graduation speeches with their usual message about how graduation is the end of one chapter of one’s life and the beginning of a new chapter.  There is also the usual talk about how one should never stop learning.  Fortunately for the students, but unfortunately for my blog, our speaker yesterday at Dalhousie (Dr. Jack Duffy) said none of those things which I plan to pick up on in this blog.  (For those interested, Dr. Duffy’s excellent and amusing (and bless his soul short) talk is available on the Dalhousie website.  But back to my blog …

 

Just like as in the usual graduation speeches, those of us in the risk management profession need to realize that we can never stop learning and each new debacle (and there will be new debacles) will begin a new chapter in the life of the risk manager.  But I wonder how many of us remember to heed these truisms (just as Dr. Duffy speculated that one would forget his speech.)  Getting a risk management degree – or certification – is just the beginning and not the end of risk learning. 

 

Einstein

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc

www.RSDsolutions.com

info@RSDsolutions.com

 

 

I am currently sitting in my hotel room in a relatively small Midwestern town waiting for a conference to start tomorrow at which I am speaking.  Not really feeling all that great so I decided to take a break and read a book that I picked up last week titled “The Quantum Ten”, by Sheilla Jones.  I am really enjoying the book (so far).  It is about the birth of quantum mechanics and the personalities of the people who created this very important paradigm shift in physics.

 

As I was reading along I read the following quote by Einstein who is talking about his well known days in the Swiss Patent Office, where he had to go as no one would accept his thesis(s) and thus he could not get a position as a physics professor or researcher.

 

“  “In a way”, said Einstein, “this saved my life; not that I would have died without it, but I would have been intellectually stunted.”  “

 

Upon reading that I thought about what the outcomes might be if we take all of the people coming out of MBA programs and Financial Engineering programs and give them jobs that are quite different for what they have been groomed for.  That would allow for maturation of the knowledge, development of a better world view, and especially in the case of risk would avoid academic group think.

 

How many of our graduates are “intellectually stunted” because they are pushed into a specific line job too early – before they have had time to develop.  Every wine drinker will get this concept.

The Flawed Risk Question

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.rsdsolutions.com

info@rsdsolutions.com

 

I am currently teaching an Enterprise Risk Management course to senior people in the MBA Financial Services program at Dalhousie.  I recently got back one of the first sets of assignments and was marking them on a plane ride to visit one of RSD’s clients. 

The marking was going quite well until I came to one student’s answer that gave me pause.  The student started their response to the question by stating – “This question is flawed.”  Interesting I thought.  All of the other students had answered the question without any such trouble.  The point is that the student was correct.  I had asked a quite reasonable academic question, but it was flawed in that the question made some implicit assumptions.  It was flawed in that although it was a good question, but it was not the right question.  It was not an impactful question.  It was not a question that would challenge to the proper degree.  It was not a question that would lead to the core of the issue.  The question was flawed. 

How often do we ask a flawed question?  In risk how often do we ask a flawed question that produces correct, but flawed answers as a result of the flaw in the question? 

The student got a good mark for their response.

Snap the Fingers on Risk. Part 2 of 3

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc

www.rsdsolutions.com

info@rsdsolutions.com

 

In a previous blog I talked about the snap the fingers exercise where you assume I have magical powers and upon snapping my fingers you get to switch your risk department with the risk department of any other company.  The challenge was to figure out who you would choose.  (The link to the original blog is here: http://tinyurl.com/5wy7wz9) 

The second step of the process is to drill down as to why you made the specific choice that you did.  In fact you need to drill down to at least 5 “why” levels to get to the core.  Going back to the original job of advising MBA students on their careers, once the student has answered the snap the fingers answer, you ask “Why do you want to be that person?”  The response is usually “because they are rich and famous.”  The next question then is “Why do you want to be rich and famous?”  and so on and so on for at least 5 series of “Why?” questions. 

Let’s go back to your risk situation.  Why did you want to have your risk department become the risk department of the firm that you chose?  What are the characteristics that they possess, that you need to possess?  What are the 5 “Why?” questions you need to ask yourself?

Risk Test

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc

www.rsdsolutions.com

info@rsdsolutions.com

 

Currently I am developing a test for one of the MBA courses that I am teaching.  Students always get anxious about tests – which of course is very understandable.  They always want to know – what is going to be on it.  Will it be hard?  Are the questions short answer, multiple choice or problem based?  Will there be essays? 

If you were to set an exam for your risk function, what would it look like?  If you wanted to test if your risk function was up to snuff, how would you do it?  What type and style of questions would you ask?  What questions would you ask?  What would qualify as a passing grade?  How would you distinguish between a high pass and a squeeze through the cracks mercy pass?  Who would mark the test – who should mark the test?  Who is qualified and unbiased enough to mark the test?  What would be the implications of failing?  What would be the implications of passing with flying colours?