by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
www.RSDsolutions.com
mailto:info@RSDsolutions.com
As outlined in a previous blog “Business School Myths” (July 25, 2010), I was to present this paper to an academic conference in Cambridge. I did so last week (and thus the absence of new blogs as I was too busy enjoying the pub life of England and Scotland).
The overall feedback was very positive, but the one flash point was the “myth” that ethics is teachable. This “myth” significantly upset a lot of commentators who clearly believed that ethics was teachable – in fact they were doing so!
One participant went so far to give me the following “lesson”. To wit – “I teach ethics and it is effective! For example I teach my university students that plagiarism is wrong, and one student who handed in an assignment wrote at the end of it that he was sorry that he plagiarized most of the assignment.”
After I got through the emotions of horror and sadness, I had to laugh. The horror was for the fact that (some) University students need to be taught that plagiarism is wrong. The sadness was for this poor soul of a professor who thought she was being effective when in fact she was being anything but effective (the student still plagiarized). The laughter was for the absurdity of the whole thing.
I believe the Jesuits in early North America were basically right when they said “Get the boy before he is 6 and you have him for life”. While you might question whether our ethics are formed by 6, 12 or 18, the point is that by the time you have reached working age, your ethics are pretty well set in stone. Having a university course in ethics is not going to change anything, so let’s just forget about wasting time on that issue.
Wednesday, August 25, 2010
Monday, August 23, 2010
Lady Gaga
by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
While mindlessly trolling the internet I came across a wonderful quote from Lady Gaga who claimed that each day she confronts her staff with the question “How are we going to be brilliant today?”
Wouldn’t it be really cool (and a lot more effective) if more risk managers started the day with that question?
Friday, August 20, 2010
Repeating Godin (Again!)
by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
www.RSDsolutions.com
info@RSDsolutions.com
A few weeks ago I rephrased one of Seth Godin’s blogs. I just read Seth Godin’s recent blog titled “Running Away versus Running Toward” and thought I should also share with our blog readers as well.
http://sethgodin.typepad.com/seths_blog/2010/07/running-away-vs-running-toward.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2Fsethsmainblog+%28Seth%27s+Blog%29
The blog is reproduced in its entirety here.
Running away vs. running toward
Every brand, every organization and every individual is either running away from something or running toward something (or working hard to stand still).
Are you chasing or being chased? Are you leading or following? Are you fleeing or climbing?
I believe that this is an excellent set of questions to ask yourself as a risk manager or a risk department.
My experience has been that most risk managers and risk departments spend their lives running away. Conversely, as I have implied in previous blogs, I believe that most risk departments should be running towards. Risk departments should be optimistic yet realistic enabling departments that allow companies to chase opportunity through creative risk management that avoids the “being chased” mentality.
Partner, RSD Solutions Inc.
www.RSDsolutions.com
info@RSDsolutions.com
A few weeks ago I rephrased one of Seth Godin’s blogs. I just read Seth Godin’s recent blog titled “Running Away versus Running Toward” and thought I should also share with our blog readers as well.
http://sethgodin.typepad.com/seths_blog/2010/07/running-away-vs-running-toward.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2Fsethsmainblog+%28Seth%27s+Blog%29
The blog is reproduced in its entirety here.
Running away vs. running toward
Every brand, every organization and every individual is either running away from something or running toward something (or working hard to stand still).
Are you chasing or being chased? Are you leading or following? Are you fleeing or climbing?
I believe that this is an excellent set of questions to ask yourself as a risk manager or a risk department.
My experience has been that most risk managers and risk departments spend their lives running away. Conversely, as I have implied in previous blogs, I believe that most risk departments should be running towards. Risk departments should be optimistic yet realistic enabling departments that allow companies to chase opportunity through creative risk management that avoids the “being chased” mentality.
Wednesday, August 18, 2010
Racquet Stringing
by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
Back in the good ‘ole days of high school, I used to run a racquet stringing business. It was a great way to support my tennis playing habits as well as put gas in the old Ford for going on dates and to burger joints etc. Thus it was quite natural when I came across an old article on Warren Bosworth – the Warren Buffet of racquet stringers – that I would pick it up and start reading it. (BTW – the article is in the June 06, 1983 edition of Sports Illustrated.)
As the article points out, Bosworth was the “stringer for the stars”. Top pros consistently rely on him, and only him, to make sure that their equipment is in top shape in order to allow them to play at their best. One of the aspects of Warren’s genius – besides creativity, a non-ending ability to ask questions and challenge the status quo, and a fanatical attention to detail – is his ability to relate to the top pros and their concerns that are often expressed in less than precise terms as this following quote from the article highlights.
But how does one arrive at those uniquely individual specifications? How does one decipher the vague code words the pros use to describe racket response—dead, mushy, tingly, harsh, solid, sling-shotty—and turn them into formulas that will result in what Tanner mysteriously describes as "a certain satisfying emotion that develops off the strings"? Therein, says Wilber, lies Bosworth's "truly singular gift, an uncanny ability to precisely translate the imprecise."
That last phrase I think bears repeating.
“… truly singular gift, an uncanny ability to precisely translate the imprecise.”
As risk managers, how many of us have the ability to “precisely translate the imprecise”? I think that instead the risk management profession is guilty of trying to avoid the imprecise at all costs. Unfortunately, risk management topics and issues are most often imprecise much to our chagrin. While “vague code words” such as “dead, mushy, tingly, harsh, solid, sling-shotty” might not be used in risk management, the terms “bad feeling, maybe something, undefined opportunity, Frank doesn’t get it” and other vague terms do (and I would argue, should) come into play.
I wonder if I can find my old racquet stringing equipment in the basement.
Thursday, August 12, 2010
Is There a Risk Paradox?
by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
www.RSDsolutions.com
info@RSDsolutions.com
As risk managers we are all aware of the credit paradox of banks. Banks become good at lending to a specific type of industry and then they start to attract more credit clients from that industry. This in turn gives the bank even more expertise in that industry, and thus they attract even more clients from that industry, and so on and so on. Eventually however the bank becomes too concentrated in that industry and that creates the credit paradox problem.
Now, here is a question – as risk managers, do we also develop risk paradoxes? Do we become so good at analyzing one type of risk that we start to make all of our analytical and conceptual techniques look the same? Do we become so focused on one aspect of risk that we miss the bigger picture? Do we become so mutually enamoured of a small number of methodologies that we as an industry introduce systemic risk into the system (for example see credit derivative analytical techniques, see LTCM, see VAR etc.)
Partner, RSD Solutions Inc.
www.RSDsolutions.com
info@RSDsolutions.com
As risk managers we are all aware of the credit paradox of banks. Banks become good at lending to a specific type of industry and then they start to attract more credit clients from that industry. This in turn gives the bank even more expertise in that industry, and thus they attract even more clients from that industry, and so on and so on. Eventually however the bank becomes too concentrated in that industry and that creates the credit paradox problem.
Now, here is a question – as risk managers, do we also develop risk paradoxes? Do we become so good at analyzing one type of risk that we start to make all of our analytical and conceptual techniques look the same? Do we become so focused on one aspect of risk that we miss the bigger picture? Do we become so mutually enamoured of a small number of methodologies that we as an industry introduce systemic risk into the system (for example see credit derivative analytical techniques, see LTCM, see VAR etc.)
Wednesday, August 11, 2010
Honda Recall
by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
As my sixteen year old, newly licensed daughter just recently “purchased” (purchased in parenthesis as it was with significant assistance from her “parent units”) a used Honda, I read with interest the news stories about the Honda recall. Honda is recalling a variety of its models for an issue dealing with the mechanism that prevents you from removing the key in the vehicle unless the vehicle is in “Park”.
I am not at all mechanically inclined. Therefore the specifics of this go over my head. However I do know enough to know that ultimately this is a redundant safety system. In other words, the vast majority of people automatically put their car into park before removing the key and walking away from the vehicle. In fact most people do this without consciously thinking about it. Thus the mechanism that Honda is recalling their vehicles to repair is really quite redundant or not needed in the vast majority of cases.
Now, this brings up a related and interesting question – “What redundant risk management systems do you have in your organization?” I am not questioning the legitimacy of redundancy – redundancy in risk systems is usually a good thing (although they can be overdone – material for a future blog). The issue I am questioning is how many backup systems do you have for risk management that you rarely if ever think about? I suspect in many ways quite a few.
This leads to a further question. Would you know if those redundant systems were still working? I have been driving a car for over thirty years (I’ll leave you guessing whether I started driving before I was old enough or not). Putting the car into Park before turning off the ignition and removing the key is second nature to me. It is simply part of the natural sequence of steps that one takes when leaving a car.
My daughter has had her license for a week. Is it possible that putting the car into Park before removing the keys and leaving the vehicle is not second nature to her yet? Of course! Would she know about the redundant key mechanism that prevents her from doing so? Of course not. If I had been driving her Honda for the last 5 years with the faulty redundant key system, would I have noticed a problem – no. Therefore is it possible that my daughter could leave the car in gear, and walk away from it and thus leaving the car – and others – in peril. You bet.
Redundant safety systems are easily forgotten. Perhaps it is time to check your redundant risk management systems and see if they are still working and / or relevant and / or working as expected. Meanwhile I will be checking the details of what specific years Honda is recalling.
Monday, August 2, 2010
What Could A Ham And Risk Management Possibly Have In Common?
by Christine Cromarty
RSD Solutions Inc.
Email: info@RSDsolutions.com
Web Site:www.RSDsolutions.com
It was with great delight that I settled down to watch the season premiere of Mad Men yesterday evening. For those who have not yet become addicted to it, the Mad Men were the men who worked on Madison Avenue in the glamorous advertising business in the 1960's. Yes there is a great deal of drinking, smoking, sexism and racism highlighted in this drama but there are also so many subtle parallels with our society today.
Although much has changed, many of the issues remain the same. Yesterday's episode was no exception as in one storyline, a few of the advertising staff decide to stage a pre-Thanksgiving battle between two women in the supermarket over a ham. They are successful in their attempt to have the story make the news, their client (owner of Sugarberry Ham) increases their media budget and a new advertising byline is created that "Our hams are worth fighting for". However, all begins to blow up, police become involved and now the integrity of the firm is now at stake. It is only at this time that Don Draper, a partner in the firm and a principal character in Mad Men, is being made aware of the situation.
How many times have you seen this type of situation occur? When employees have made decisions which they feel will profit the firm and yet put the whole firm at risk? Where top management is only brought in after it is too late? Is it not for this reason, Risk Departments have been created? Firms of all shapes and sizes need to have a group which can create guidelines and independently assess the wide range of risks which face them. It is impossible to anticipate all forms and sources of risks and there is always a fear that creativity might be stifled by a Risk Department. No matter what type of institution you are, it is important to face risks quickly and creatively.
What type of Risk Department do you have??
RSD Solutions Inc.
Email: info@RSDsolutions.com
Web Site:www.RSDsolutions.com
It was with great delight that I settled down to watch the season premiere of Mad Men yesterday evening. For those who have not yet become addicted to it, the Mad Men were the men who worked on Madison Avenue in the glamorous advertising business in the 1960's. Yes there is a great deal of drinking, smoking, sexism and racism highlighted in this drama but there are also so many subtle parallels with our society today.
Although much has changed, many of the issues remain the same. Yesterday's episode was no exception as in one storyline, a few of the advertising staff decide to stage a pre-Thanksgiving battle between two women in the supermarket over a ham. They are successful in their attempt to have the story make the news, their client (owner of Sugarberry Ham) increases their media budget and a new advertising byline is created that "Our hams are worth fighting for". However, all begins to blow up, police become involved and now the integrity of the firm is now at stake. It is only at this time that Don Draper, a partner in the firm and a principal character in Mad Men, is being made aware of the situation.
How many times have you seen this type of situation occur? When employees have made decisions which they feel will profit the firm and yet put the whole firm at risk? Where top management is only brought in after it is too late? Is it not for this reason, Risk Departments have been created? Firms of all shapes and sizes need to have a group which can create guidelines and independently assess the wide range of risks which face them. It is impossible to anticipate all forms and sources of risks and there is always a fear that creativity might be stifled by a Risk Department. No matter what type of institution you are, it is important to face risks quickly and creatively.
What type of Risk Department do you have??
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