Thursday, March 12, 2015
Action
To some degree we are all hard-wired for
action. When something happens we want
to react. This is especially true when
something risky happens – or is about to happen. However sometimes action is rash. Sometimes doing nothing or delaying action is
more wise or prudent. Sometimes first assessments
are false or misleading and lead to in appropriate action. Sometimes the action taken is more costly
than any benefit that could be gained.
Doing nothing is hard, but sometimes it is the most realistic and proper
action to take.
Wednesday, March 11, 2015
Journey
In his excellent book “Enterprise Risk
Management: From Incentives to Controls” (2nd Edition, Wiley),
author James Lam makes the excellent point that “Enterprise Risk Management is
a journey not a destination”. Well
stated.
Monday, March 9, 2015
Experiment
The great physicist Richard Feynman stated that
“The test of all knowledge is experiment.
Experiment is the sole judge of scientific truth.” Despite his well known presence on the panel
examining the Challenger space shuttle disaster, Dr. Feynman was not a risk
manager. It is rare in (business) risk
that we get to do experiments.
Furthermore, even if we could do experiments we would find almost all of
the results inconclusive. Unlike
physics, risk management is not a physical science. It is a social science. As such, the laws of nature underlying
business risk management are not exact nor are they reproducible. People and organizations change their minds
and they change their strategies, tactics and actions – sometimes for reasons
that are completely unknown. Fortunately
or unfortunately, as risk managers we do not have the power of experiment to
develop our knowledge. Thus I suspect
Richard Feynman would consider risk management a science in name only – and I
am ok with that.
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