Discipline Versus The Whim

 

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

I was listening to an interesting radio show the other day about how artists
work.  As readers of my blog know, I believe that as risk managers we have
to have at least a touch of thinking like artists.  The radio show went on
about how artists tend to fall into two very distinct camps when it comes to
approaching their work.  Some artists are very disciplined and work a set
time each day and in a designated spot.  They are creatures of habit and
their habit reinforces their discipline.  Other artists take the opposite
approach and work when and only when the felling or whim strikes them.  It
was argued that while the latter approach often leads to less output (but not
always), it does generally lead to more creative output.

Now I am not suggesting that risk managers only work when and where they feel
like it, but perhaps it is possible to scale back the strict habit and
discipline routines.  Perhaps?

Same Thinking

 

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

Einstein once said that you cannot use the same thinking to solve a problem
as the thinking that caused the problem.  However, isn't that exactly what
we are doing with most of the regulatory frameworks around financial risk
management?  Yes, there will be those that argue that it has new ratios, new
definitions, different measures, etc. etc. etc.  But really – aren't
these really all more of the same, and aren't they really just more of the
same thinking?

Definitions

 

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

Last week someone posted on one of the Linked-In groups the question, "What
is your definition of risk?"  The response this generated – actually the
debate it caused – was humorous, embarrassing and a lit bit depressing. 
What should be such a straightforward issue turned out to be anything but. 
Various commentators parsed, sliced and diced their favorite risk frameworks
and debated the fine and not so fine placement of commas and other irrelevant
factors.  Some argued for definitions that you needed a PhD in Philosophy to
decipher.  Needless to say, if a profession cannot define a term in its
title, then the profession itself might need a rethink.

For the record, my definition of risk – which I put forward in a previous
blog a couple of years ago is – "Risk is the possibility that bad or good
things may happen".  It may not be fancy, but at least you do not need a
PhD in Philosophy to understand it.

Adequate

 

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

We are in the age of ranking and rating things.  Ten best, and ten worst
lists litter the internet.  Try to find a restaurant site that doesn't
have the number of stars they received from the various reviewers on it. 
Ask someone if they liked a movie and they will answer with a number out of
ten.

 How would you rate your risk management system?  Does it matter?  Is an
adequate risk management system good enough?  Does anyone even think of
ranking the risk management system?  Should they be doing so, or does it not
matter? 

No Trouble

 

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

If a company never runs into trouble, does that mean that its risk management
department is doing a great job?  Or does it mean that the risk management
department is throttling the company?  Or does it mean that the company is
dead?  Or does it mean that the company is just too irrelevant for anyone to
notice?

Conferences

 

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

I just came back from speaking at the Travel Health Insurance Association
(THIA) conference in Hollywood.  I had a great time as I got to meet many of
the conference attendees.  Flying all the way from one coast to the other
coast I have to admit that I was wondering if conferences have met their past
due date.  After all it is quite expensive for all to attend a conference,
in terms of both expenses and time.  However once I was there I realized why
conferences are so important – particularly one as well designed as this
one.

The problem with many conferences is that they think it is (a) all about the
content, and (b) only content that will be applied on the first day back at
the office is what is important.  The THIA conference showed that the
opposite was true.  While the location in sunny California certainly helped,
the main reason the THIA conference was such a success is that the focus was
on selecting speakers who covered an eclectic set of ideas.  The conference
provided a forum for thinking.  Secondly the conference provided a forum for
socializing and informal networking in a very comfortable rather than forced
way that is so common at many conferences.

Ideas and the ability to build new and reinforce old connections is what
conference should be about.  If those two components are present, then the
ready to apply work tools will follow, and that is what makes a conference a
value-adding event. 

We’ve Always Done it This Way

 

*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*

If you try something new at your office then I bet you have heard the
expression, “but we’ve always done it this way”.  Sometimes that is a
good thing, in that through trial and error – generally long ago – the
company determined that the optimal way to complete a process was the way
that it has “always been done”.  Sometimes however the expression is a
real negative in that it implies that nobody has ever tried to do it a
different way, and thus no one knows whether there is a better way to do it
or not.

In risk management there is a lot of stuff that we do simply because
“we’ve always done it that way”.  What today’s risk manager needs to
determine is whether or not that is because it is a tried and true method, or
because of a lack of creativity and initiative to try something else.