Convince Others to Embrace Risk - Management Tip of the Day - August 10, 2011. Comprehensive Leadership Programs at HBS. Better Risk Communication - Ndubuisi Ekekwe - The Conversation. By Ndubuisi Ekekwe | 11:08 AM May 11, 2011 Consider two scenarios: Company A is a medical device maker that just released a new pacemaker. Its datasheet states that the device could fail once every 90 years. Its competitor, Company B, released its latest version a week before. In its datasheet, it noted that the device is guaranteed to function properly, under approved procedures, for 15 years, before it begins to experience reliability problems, due to aging and other factors. In these two fictitious scenarios, Company B does better in communicating the risk of its product. It has provided certainty, through a concrete number, that can enable better decision making on the expected performance of the products.
Vague risk communication happens when a product is not thoroughly tested or when the constructs of the risk model is not sufficiently broad. Ndubuisi Ekekwe is a founder of the non-profit African Institution of Technology. The Risks of Quantification - William Byers - The Conversation. By William Byers | 8:17 AM May 18, 2011 Quantification — describing reality with numbers — is a trend that seems only to be accelerating. From digital technology to business and financial models, we interact with the world by means of quantification. While we all interact with the world through more-or-less inflexible models, mathematics contributes to this lack of flexibility because it is seemingly precise and objective. Even though mathematical models can be very complex, you can use them without understanding them very well. A trader need not really understand the financial engineering models that he may use on daily basis.
Hitting the bottom line is certainly easier when you know with precision what that bottom line is. What we misunderstand is that introducing mathematics and quantification into any situation subtly changes that situation and this needs to be taken into account. Consider the following four issues: Hbr-build-risk-business-model.pdf (application/pdf Object) Every Manager Is a Risk Manager - Ron Ashkenas. By Ron Ashkenas | 1:54 PM May 3, 2011 An MBA student once asked me to give her a simple explanation of the “risk management function.”
After a few minutes of fumbling, I told her that risk management is the process of identifying, prioritizing, and mitigating the impact of unforeseen (and usually negative) events. In other words, it’s a form of proactive contingency planning — either to completely avoid difficult situations, or prepare for them so that any undesirable consequences are lessened. Her question got me thinking about who is actually responsible for managing risk in an organization. There are many types of risk, and the official risk management function usually only addresses the most critical ones. For example, in a bank, risk management concentrates on financial risk; in a hospital, the focus is on patient and legal risk; in a manufacturing firm, the concern might be product or environmental liability; and in a utility the priority is outages.
Hbr-build-risk-business-model.pdf (application/pdf Object) Comprehensive Leadership Programs at HBS.