Tag: featured

The Nature of Risk

By David X Martin

The Nature of Risk is an easy-to-understand, entertaining, and memorable story designed to help readers face one of modern life’s most important and difficult tasks—confronting risk. Free of complicated theories or formulas, The Nature of Risk relies instead on a cast of familiar, forest-dwelling animals, each of which embodies a different approach to risk management. At least one of these approaches will seem familiar to every reader—whether they knew they had an approach to risk management or not. Then, as the narrative unfolds, the strengths and weaknesses of each approach will be revealed as they are put to a series of natural tests. Finally, at the conclusion of the story, readers will find a short review section designed to help them frame their first attempts at managing risk—with or without professional help. Read more >

Managing the Unexpected

Assuring High Performance in an Age of Complexity

Book by Karl E. Weick and Kathleen M. Sutcliffe
Review by Michael J. Novak for Office of Research, IRS

“By some estimates, executives and managers spend nearly half their time in activities related to planning: developing an organizational vision; translating that vision into a strategic plan; communicating the plan; deploying the plan via subordinate – e.g., operational, business, financial, human capital, and individual performance – plans, monitoring progress of plans; initiating corrective action when plans go off track; articulating reasons why the plans failed to achieve desired outcomes; and rewarding individuals and teams for their parts in successful execution of the plans.

But why plan? In today’s fast-paced, highly complex transformational environment, it could be argued that planning is obsolete. Because the environment is so chaotic – because the future is therefore so fraught with uncertainty – it is impossible to predict the future. And that is why some organizations have given up on planning: They see it as a waste of precious time that could be used reacting to unpredicted (unpredictable?) events.

That is the impression one might get from a first reading of the book under consideration. Weick and Sutcliffe tell us, among other things, that planning might not only be obsolete; it might be dysfunctional. Picture this: An organization has strategic plans, operational plans, annual business plans, and contingency plans – all expertly crafted, deployed, and executed – yet a series of unexpected events (Murphy’s Law in action) derail the plans and cause disaster. Weick and Sutcliffe argue that the mere fact of such extensive planning tends to detract executives’ and managers’ attention away from those aberrations that fall outside the plans. Organizational leaders may assume that these pesky little anomalies are simply random occurrences when, in fact, they are part of a larger, more insidious pattern coming into play – one that is not recognized until the damage is done.” Read more>

National Entrepreneur Day

Nassim Taleb: ‘The Black Swan’ author in praise of the risk-takers

The writer and former options trader Nassim Taleb talks to Margareta Pagano about banking, Babylon and birdsong

By The Independent

Nassim Nicholas Taleb has a dream. It’s this: he wants us to celebrate the restaurant owners, the taxi drivers, the market traders and carpenters and all the other risk-takers who put their skin in the game and who drive the economy for the rest of us.

“Let’s call it a National Entrepreneur Day,” declares the author of the best-selling The Black Swan, and have a day devoted to entrepreneurs, because they are the heroes who at times take suicidal risks for the mere survival of the economy: “Optionality makes things work and grow – the UK and the US have a fantastic history in risk-taking, in trial and error, without shame in failing and starting again. We need to recover that spirit.” Read more >

Innovation Risk: How to Make Smarter Decisions

By Robert Carhart Merton for Harvard Business Review

New products and services are created to enable people to do tasks better than they previously could, or to do things that they couldn’t before. But innovations also carry risks. Just how risky an innovation proves to be depends in great measure on the choices people make in using it.

Ask yourself this: If you had to drive from Boston to New York in a snowstorm, would you feel safer in a car with four-wheel drive or two-wheel drive? Chances are, you’d choose four-wheel drive. But if you were to look at accident statistics, you’d find that the advent of four-wheel drive hasn’t done much to lower the rate of passenger accidents per passenger mile on snowy days. That might lead you to conclude that the innovation hasn’t made driving in the snow any safer.

Of course, what has happened is not that the innovation has failed to make us safer but that people have changed their driving habits because they feel safer. More people are venturing out in the snow than used to be the case, and they are probably driving less carefully as well. If you and everyone else were to drive to New York at the same speed and in the same numbers as you did before, four-wheel drive would indeed make you a lot safer. But if you and everyone else were to drive a lot faster, you’d face the same amount of risk you’ve always had in a snowstorm. In essence, you’re making a choice (consciously or unconsciously) between lowering your risk and improving your performance.

If the riskiness of an innovation depends on the choices people make, it follows that the more informed and conscious their choices are, the lower the risk will be. Read more >

Picture: Harvard Business Review ©

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