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Lesson 6: The Wrong Model

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The very word “risk management” is a problem. It’s too intuitive. Mention “risk management” to someone, and they will know what you are talking about. Or they will think they do. Ask people to define risk management, and issues arise. Definitions of Risk Management Here’s the COSO 2004 definition: … risk management is a process, effected by an entity’s board of directors, management and other … Continue reading Lesson 6: The Wrong Model

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Lesson 10: Defining the Right Model

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This is the final lesson of our course. We have discussed plenty about the right and wrong models for risk management. But one task remains. We still need to define the right model. Context In Lesson 7 we formally defined the wrong model. I opened that discussion with the following exhibit. It describes decision makers within a company as risk takers. Some make strategic decisions; … Continue reading Lesson 10: Defining the Right Model

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Lesson 9: Beyond Numbers

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Every lesson of this course should get you thinking, but this one especially. Do you remember in Lesson 3 how I described a hypothetical meeting in which you encouraged individual decision making? A decision was made, and you said I will include the decision in the narrative section of today’s risk report. I just need to know whom I should say made the decision. It … Continue reading Lesson 9: Beyond Numbers

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Lesson 8: Origins

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Every group has history, folk law, legends. Every group has origin stories. These answer questions like where did we come from? What matters to us? What lies ahead? Origin stories can be happy or sad, uplifting or tragic. They can convey a sense of something lost—think of the Garden of Eden—or of things left undone. Pandora’s Box, the Continental Congress, Abraham, Gilgamesh, the Hijra, Lord … Continue reading Lesson 8: Origins

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Lesson 7: Defining the Wrong Model

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We have discussed much about the right and wrong models: The wrong model focuses on outcomes. The right model focuses on causes. The wrong model is brash but shallow. The right model is subtle but deep. By now you should be convinced that the wrong model cannot work. But for this knowledge to be useful, you need to understand exactly what the wrong model is—and … Continue reading Lesson 7: Defining the Wrong Model

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Risk Takers vs. Risk Managers

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The very word “risk management” is a problem. It’s too intuitive. Mention “risk management” to someone, and they will know what you are talking about. Or they will think they do. Ask people to define risk management, and issues arise. Definitions of Risk Management Here’s the COSO 2004 definition: … risk management is a process, effected by an entity’s board of directors, management and other … Continue reading Risk Takers vs. Risk Managers

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How Not to Bake a Cake

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It is time to leave the warm and sunny world of the right model and descend into the cold dark world of the wrong model. Don’t worry. We won’t stay long. It is just that … how can I explain this? To understand quiet, you need to experience noise. To understand good, you need to experience evil. To understand the right model … OK. Let’s … Continue reading How Not to Bake a Cake

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How Groups Decide

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I recently wrote to you about risk maps. The wrong model assumes that you must identify risks in order to manage them—that you must create a risk map listing all your organization’s risks and devise a strategy for managing each. This can’t possibly work. The good news is that you don’t have to identify individual risks in order to manage them. I promised you a … Continue reading How Groups Decide

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Risk Maps: Necessary or Not?

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Let’s start with a foundational question: Do you need to identify risks before you can manage them? Your answer will drive your entire strategy for managing risk. According to the wrong model for risk management, risks have to be identified before they can be managed. According to the right model, they do not. The wrong model starts with risk managers compiling a list of all … Continue reading Risk Maps: Necessary or Not?

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No One Is Going To Tell You This

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Modern risk management is about calamities that strike like lightning bolts. There’s no warning. It is about anticipating those calamities, devising strategies to address them, and saving the day. This is the popular view. It’s romantic, but it’s wrong. I’ve worked in risk management for two decades—most of that time as a consultant. I have helped small firms and large, financial institutions and corporates.

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