Use Common Sense for Risk Analysis

The two weeks between Dussehra and Diwali are supposed to be spent in prayers as these are auspicious. North Indians’ celebrate it by having gambling parties every night. Card sessions, mostly Flash and Rummy, are held in homes, and these start around dinner and continue till 6 a.m. in the morning. The indulgence is called 3MW. M and W are alphabets which are upside down.

What is the link? Men spend their nights for wine, women and wealth. Women spend them on men, money and madira (alcohol). Quite a few careers, relationships and bank balances  are affected in these two weeks.

It is worth contemplating,  what makes human beings have such a huge appetite for risks and put their life’s hard work on stake. Hence, in this post I have covered three posts on risk management. The post describe risk management models, building a culture for risk management  and obtaining support from senior management.

1.     Risk of using Models in Risk Management – Part 1 & II (via Ontonix- Practical Complexity Management)

There is a pithy quote from someone (it could be the Black Swan guy) which goes something like “Dont cross a river because it is on average 4 foot deep”.

If that quote sounds like ancient Eastern mysticism, you would be surprised to know when it was made! In today’s tough economic times though, one wishes that people who were put in charge of making decisions had heeded this simple wisdom. But this is precisely what was overlooked by the financial market gurus – decisions were made because the calculated average loss in an investment was only “4-feet deep”! The erstwhile Lehman Brothers remains a poster-child for the fallacy of this sort of thinking.

2.     Building the case for ERM (via Norman Marks on Governance, Risk Management, and Internal Audit)

This week, a risk officer from a major UK company asked me how to move the mind of top management from thinking about enterprise risk management (ERM) as something they have to do (a ‘ check-the-box activity) to something they want to do.

I have found this to be an issue in all parts of world. Even where companies are appointing chief risk officers (CRO) and agreeing to a risk management program, their hearts aren’t really in it. Risk is not top of mind. The CRO is not at the executive table and does not participate in executive decision-making, such as the setting of strategies and plans.

Why? Because they don’t see risk management as something that helps them succeed. All the CRO is offering is insight into the top risks facing the company. Hopefully, this is driving actions to ensure those risks are monitored and remain within organizational tolerances

3.  Situational Awareness: Battlefield to Board Room… (Via Operational Risk Management)

Creating a “Common Operational Picture” for your organization is an elusive yet attainable goal for your senior management and the Board of Directors. How at a moments notice does the organization provide leadership with the answers to Operational Risk questions such as:

  1. How many employees from our company are currently traveling outside your home country?
  2. What are their modes of transportation and where do they plan to stay each night?

Have a nice time celebrating Diwali week, but do take care. Be safe and happy. I attended the Diwali bash in my apartment building last night. The residents had organized a cultural show by kids and a nice dinner and dance party. The kids were adorable and food was mouth-watering. An excellent fun-filled evening with no risks attached. Enjoy life with minimal risks 🙂