*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
I fly a fair bit, and being a Canadian I am somewhat limited to three
different airlines that serve my local airport. On one airline the staff
seem to be truly happy about working. They are friendly, courteous, and
almost always seem to have smiles on their faces. On the second airline the
staff is quite professional, but really do not have an attitude one way or
the other – they certainly do not have a negative attitude, but neither do
they have a positive friendly attitude. In regards to the third airline,
the attitude is generally (with some notable exceptions) very negative. The
joke is that the company motto is "We're not happy until you're not
happy". It is really quite shocking the difference.
In risk management we talk a lot about culture – but rarely do we talk
about attitude. Creating a culture is a long and difficult task. Perhaps
it is best to start with something simple and basic – such as attitude.
Creating an environment where people have a positive attitude about risk, and
the risk management systems in place just might be a better way to think
about changing a company's risk culture.
[1] https://twitter.com/rsdsolutions
Friday, March 14, 2014
Thursday, March 13, 2014
Scale
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
It is a beautiful March day – cool but clear. I am lucky enough to live
on a lake, and I write this blog I am watching a group of kids play a game of
hockey on the lake. Sometimes it is really great to be a Canadian!
The lake is about the size of 10 football fields. By Canadian standards not
a very large lake, but still it is a heck of a lot larger than a typical
hockey rink. Just as a lark, the kids have set up goalposts at each end of
the lake and are playing a game of hockey that uses the entire lake surface
as a hockey rink. Probably one of the largest unofficial hockey rinks ever
– although I assume these kids are not the first to realize the joy (and
fatigue) of skating and playing hockey on such a huge rink.
Watching the kids trying to play hockey on such a big "arena" got me
thinking of scale. Hockey was not meant to played on such a large surface
– as these kids are finding out as their passes stop half-way to their
intended targets. While playing with an incorrect scale is fun for pick-up
hockey, it is not fun or effective for a risk management system. Thus the
question – is your risk management system and ideas big enough for your
organization? Is your risk management too large, or is it too small?
Either way it doesn't fit.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
It is a beautiful March day – cool but clear. I am lucky enough to live
on a lake, and I write this blog I am watching a group of kids play a game of
hockey on the lake. Sometimes it is really great to be a Canadian!
The lake is about the size of 10 football fields. By Canadian standards not
a very large lake, but still it is a heck of a lot larger than a typical
hockey rink. Just as a lark, the kids have set up goalposts at each end of
the lake and are playing a game of hockey that uses the entire lake surface
as a hockey rink. Probably one of the largest unofficial hockey rinks ever
– although I assume these kids are not the first to realize the joy (and
fatigue) of skating and playing hockey on such a huge rink.
Watching the kids trying to play hockey on such a big "arena" got me
thinking of scale. Hockey was not meant to played on such a large surface
– as these kids are finding out as their passes stop half-way to their
intended targets. While playing with an incorrect scale is fun for pick-up
hockey, it is not fun or effective for a risk management system. Thus the
question – is your risk management system and ideas big enough for your
organization? Is your risk management too large, or is it too small?
Either way it doesn't fit.
[1] https://twitter.com/rsdsolutions
Scale
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
It is a beautiful March day – cool but clear. I am lucky enough to live
on a lake, and I write this blog I am watching a group of kids play a game of
hockey on the lake. Sometimes it is really great to be a Canadian!
The lake is about the size of 10 football fields. By Canadian standards not
a very large lake, but still it is a heck of a lot larger than a typical
hockey rink. Just as a lark, the kids have set up goalposts at each end of
the lake and are playing a game of hockey that uses the entire lake surface
as a hockey rink. Probably one of the largest unofficial hockey rinks ever
– although I assume these kids are not the first to realize the joy (and
fatigue) of skating and playing hockey on such a huge rink.
Watching the kids trying to play hockey on such a big "arena" got me
thinking of scale. Hockey was not meant to played on such a large surface
– as these kids are finding out as their passes stop half-way to their
intended targets. While playing with an incorrect scale is fun for pick-up
hockey, it is not fun or effective for a risk management system. Thus the
question – is your risk management system and ideas big enough for your
organization? Is your risk management too large, or is it too small?
Either way it doesn't fit.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
It is a beautiful March day – cool but clear. I am lucky enough to live
on a lake, and I write this blog I am watching a group of kids play a game of
hockey on the lake. Sometimes it is really great to be a Canadian!
The lake is about the size of 10 football fields. By Canadian standards not
a very large lake, but still it is a heck of a lot larger than a typical
hockey rink. Just as a lark, the kids have set up goalposts at each end of
the lake and are playing a game of hockey that uses the entire lake surface
as a hockey rink. Probably one of the largest unofficial hockey rinks ever
– although I assume these kids are not the first to realize the joy (and
fatigue) of skating and playing hockey on such a huge rink.
Watching the kids trying to play hockey on such a big "arena" got me
thinking of scale. Hockey was not meant to played on such a large surface
– as these kids are finding out as their passes stop half-way to their
intended targets. While playing with an incorrect scale is fun for pick-up
hockey, it is not fun or effective for a risk management system. Thus the
question – is your risk management system and ideas big enough for your
organization? Is your risk management too large, or is it too small?
Either way it doesn't fit.
[1] https://twitter.com/rsdsolutions
Tuesday, March 11, 2014
Blogs
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
I enjoy writing these blogs – I hope you enjoy reading them. I try to
keep them short and breezy. Over the past four years, I have written
approximately 500 blogs. That is a chunk of ideas – and undoubtedly not
all of them were high quality ideas. The point is however, as one of my
friends put it, "one you start, you got to keep feeding the beast!"
Feeding the blog beast means coming up with something to write about. For
risk management that is quite easy most of the time. Risk management is
such a rich and developing field that there are many different ideas to put a
few words to word processor on. However it is easy to get stuck in a rut,
and get stuck on one or two ideas. It sometimes takes work to come up with
"fresh" ideas. But that is also true of risk management. As risk
managers we also tend to get stuck in ruts, using one technique or concept
for every issue that comes along. As risk managers we got to "keep
feeding the beast" with fresh ideas for managing and exploiting risk. We
cannot be satisfied with what has been written (developed); we must always be
thinking of new and fresh ideas.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
I enjoy writing these blogs – I hope you enjoy reading them. I try to
keep them short and breezy. Over the past four years, I have written
approximately 500 blogs. That is a chunk of ideas – and undoubtedly not
all of them were high quality ideas. The point is however, as one of my
friends put it, "one you start, you got to keep feeding the beast!"
Feeding the blog beast means coming up with something to write about. For
risk management that is quite easy most of the time. Risk management is
such a rich and developing field that there are many different ideas to put a
few words to word processor on. However it is easy to get stuck in a rut,
and get stuck on one or two ideas. It sometimes takes work to come up with
"fresh" ideas. But that is also true of risk management. As risk
managers we also tend to get stuck in ruts, using one technique or concept
for every issue that comes along. As risk managers we got to "keep
feeding the beast" with fresh ideas for managing and exploiting risk. We
cannot be satisfied with what has been written (developed); we must always be
thinking of new and fresh ideas.
[1] https://twitter.com/rsdsolutions
Monday, March 10, 2014
Living Wills
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
If you are of a certain age you likely have a will. Financial institutions
in many countries now also have a version of a will; a living will.
Assuming you are relatively healthy, both mentally and physically, then I
suspect you have no idea of how you are going to die. Likewise, a financial
institution, assuming it is relatively healthy and sound also has no idea how
it will cease to exist. If you knew how you were going to die, you would
undertake actions to mitigate the chances of dying. Likewise, even the most
ineptly run financial institution will manage itself to decrease the probably
of going out of business.
How a person dies is either natural or through some type of unforeseeable
accident. It is the same for financial institutions (or any other type of
business organization for that matter); they die naturally through the normal
course of business, or they go out of business through a set of unforeseeable
circumstances.
Having a will does not change your chance of dying. A financial institution
having a will does not change its probability of failing. A will is a tool
for after you die, not before. Let's stop pretending otherwise.
There is one major difference between a (living) will for an individual and a
living will for a financial institution. A (living) will for both a person
and for a financial institution is intended to create an orderly windup. In
the case of a person, a (living) will is of great service to the family
members and the executor of an estate. However I am highly confident that
whatever series of events that occur that cause a major financial institution
to fail, it will almost certainly make the living will of that institution a
farcical useless artifact.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
If you are of a certain age you likely have a will. Financial institutions
in many countries now also have a version of a will; a living will.
Assuming you are relatively healthy, both mentally and physically, then I
suspect you have no idea of how you are going to die. Likewise, a financial
institution, assuming it is relatively healthy and sound also has no idea how
it will cease to exist. If you knew how you were going to die, you would
undertake actions to mitigate the chances of dying. Likewise, even the most
ineptly run financial institution will manage itself to decrease the probably
of going out of business.
How a person dies is either natural or through some type of unforeseeable
accident. It is the same for financial institutions (or any other type of
business organization for that matter); they die naturally through the normal
course of business, or they go out of business through a set of unforeseeable
circumstances.
Having a will does not change your chance of dying. A financial institution
having a will does not change its probability of failing. A will is a tool
for after you die, not before. Let's stop pretending otherwise.
There is one major difference between a (living) will for an individual and a
living will for a financial institution. A (living) will for both a person
and for a financial institution is intended to create an orderly windup. In
the case of a person, a (living) will is of great service to the family
members and the executor of an estate. However I am highly confident that
whatever series of events that occur that cause a major financial institution
to fail, it will almost certainly make the living will of that institution a
farcical useless artifact.
[1] https://twitter.com/rsdsolutions
Thursday, March 6, 2014
Laplace
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
Pierre Simon Laplace was a physicist, astronomer, mathematician and as we
will discuss a philosopher who lived from 1749 – 1827. Many readers of
this blog will of course know of Laplace through their study of Laplace
transforms in university.
For the general public, Laplace is probably better known for his thought
(which I am paraphrasing) that, if he knew the position and momentum of every
particular on earth, and if he had enough calculating power, then he would be
able to completely determine the future of the world.
That is a very profound statement, and it brings up all sorts of questions
about free-will and in part is responsible for Einstein's famous comment
that (again paraphrasing) "God does not place dice".
I believe that philosophy is best left to discussions in bars while you are
waiting for the game to start. However as you start your day, the thought
of Laplace's does give you pause. My point for this blog – a blog
supposedly about risk management – is does Laplace's comment give us
pause in risk? In other words, aren't many of us implicitly going around
trying to manage risk so as to be able to completely determine the future
outcomes of the organization (or at least the downside outcomes)? Are not
the regulators also implicitly making the same assumptions (having the dream
of a predetermined and thus risk free world) with the imposition of each new
regulation? Don't most risk managers dream of a world like Nirvana where
every risk can be pre-determined and controlled?
Perhaps it is time we explicitly checked what we think about Laplace's
conjecture a bit more before we set our risk management goals.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
Pierre Simon Laplace was a physicist, astronomer, mathematician and as we
will discuss a philosopher who lived from 1749 – 1827. Many readers of
this blog will of course know of Laplace through their study of Laplace
transforms in university.
For the general public, Laplace is probably better known for his thought
(which I am paraphrasing) that, if he knew the position and momentum of every
particular on earth, and if he had enough calculating power, then he would be
able to completely determine the future of the world.
That is a very profound statement, and it brings up all sorts of questions
about free-will and in part is responsible for Einstein's famous comment
that (again paraphrasing) "God does not place dice".
I believe that philosophy is best left to discussions in bars while you are
waiting for the game to start. However as you start your day, the thought
of Laplace's does give you pause. My point for this blog – a blog
supposedly about risk management – is does Laplace's comment give us
pause in risk? In other words, aren't many of us implicitly going around
trying to manage risk so as to be able to completely determine the future
outcomes of the organization (or at least the downside outcomes)? Are not
the regulators also implicitly making the same assumptions (having the dream
of a predetermined and thus risk free world) with the imposition of each new
regulation? Don't most risk managers dream of a world like Nirvana where
every risk can be pre-determined and controlled?
Perhaps it is time we explicitly checked what we think about Laplace's
conjecture a bit more before we set our risk management goals.
[1] https://twitter.com/rsdsolutions
Wednesday, March 5, 2014
Questions
*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
I had dinner last week with a relatively new alumnus from the MBA program
that I teach in. Meeting with alumni is such a wonderful thrill. The
former students are always quick to tell me what they learned from me and the
other professors, and most valuable for me (from a self-learning perspective)
is to hear from them what they did not learn but wish they had learned.
This young fellow is particularly bright, but also speaks his mind – which
makes him very refreshing in this age of political correctness. The comment
he made to me that has occupied my mind since the meeting is: "whenever I
went to you with a question, you always responded by giving me more
questions. You never gave me an answer, but through some strange process I
always seemed to have a better idea of what to do after to seeing you. But
it was so frustrating!"
I never really thought about things in quite the way that the student put it,
but after staring at the hotel ceiling for the entire night thinking through
what he said I came to the conclusion of: "so what?! The issues got
resolved."
As I thought about it further though, a better way of assessing the situation
came to me. As I said, this alumnus is a particularly bright young man.
Whenever he had a question it was always a high caliber question, full of
complexity. (The simple questions he had the intellect and ambition to
solve himself.) I realized that "high caliber, complex questions", do
not have simple answers. You cannot answer them in a definitive manner.
The best you can do to solve them - to get ideas about how to manage these
problems – is to try to develop some concepts. And the best way to
develop complex concepts is to ask some complex questions that probe around
the initial problem or question.
We have become too accustomed to looking for answers on Google, or from a
consultant or expert. If the original question is a really good "high
caliber, complex question", then perhaps the best answer is a set of more
thought provoking, concept developing questions! It might be "so
frustrating" to work this way, but it is the only way I know of how to deal
with really great problems and issues.
[1] https://twitter.com/rsdsolutions
Partner, RSD Solutions Inc/*
*/Follow us on Twitter/* [1]
I had dinner last week with a relatively new alumnus from the MBA program
that I teach in. Meeting with alumni is such a wonderful thrill. The
former students are always quick to tell me what they learned from me and the
other professors, and most valuable for me (from a self-learning perspective)
is to hear from them what they did not learn but wish they had learned.
This young fellow is particularly bright, but also speaks his mind – which
makes him very refreshing in this age of political correctness. The comment
he made to me that has occupied my mind since the meeting is: "whenever I
went to you with a question, you always responded by giving me more
questions. You never gave me an answer, but through some strange process I
always seemed to have a better idea of what to do after to seeing you. But
it was so frustrating!"
I never really thought about things in quite the way that the student put it,
but after staring at the hotel ceiling for the entire night thinking through
what he said I came to the conclusion of: "so what?! The issues got
resolved."
As I thought about it further though, a better way of assessing the situation
came to me. As I said, this alumnus is a particularly bright young man.
Whenever he had a question it was always a high caliber question, full of
complexity. (The simple questions he had the intellect and ambition to
solve himself.) I realized that "high caliber, complex questions", do
not have simple answers. You cannot answer them in a definitive manner.
The best you can do to solve them - to get ideas about how to manage these
problems – is to try to develop some concepts. And the best way to
develop complex concepts is to ask some complex questions that probe around
the initial problem or question.
We have become too accustomed to looking for answers on Google, or from a
consultant or expert. If the original question is a really good "high
caliber, complex question", then perhaps the best answer is a set of more
thought provoking, concept developing questions! It might be "so
frustrating" to work this way, but it is the only way I know of how to deal
with really great problems and issues.
[1] https://twitter.com/rsdsolutions
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