How much of a risk are your risk management practices?

By Stephen McPhie, CA
Partner, RSD Solutions Inc.

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Are your risk management procedures out of date before they get implemented?  Many companies seem to spend an inordinate amount of time establishing and documenting their policies and procedures, then canvassing all sorts of staff to identify risks and document how to deal with them.  By the time it is all done, even the amount of paperwork could constitute a fire risk!  But risk is dynamic and ever changing.  Is your approach to risk management dynamic and ever changing too? 

Nothing More, Nothing Less

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.

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Repost of blog from January 20, 2010

The role of a risk management function is to increase the probability and magnitude of good events happening and decrease the probability and severity of bad events happening – nothing more and nothing less.

Risk management is not auditing.

Risk management is not forecasting.

Risk management is not always saying “thou must not”.

Risk management is not certainty.

Risk management is enabling.

Risk management is value adding.

Risk management is prudence.

Risk management is reasonableness.

Ill Defined

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.

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I am currently reading the very interesting biography of Benoit Mandelbrot, “The Fractalist”.  Mandelbroit had a very atypical mathematical career that enabled him to create the field of fractals and chaos theory.  I highly recommend the book as it has many ideas that are very relevant to risk management.

In particular there was one line that struck me as written specifically for risk management: “Being ill-defined is a feature to all important concepts”.  Many aspects of risk management are ill-defined – despite our best efforts to make them concretely defined, or our best efforts to ignore the fact that they are ill-defined. 

If we are to be effective risk managers, we need to embrace the ill-defined nature of our field, not to be scared of it.