The Great Wreckoning

Guest Post by Geary Sikich (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

Time matters most when decisions are irreversible

Transparent vulnerabilities are so obvious that they are easily overlooked; they are the ones we:

• see when they are pointed out;
• recognize when we are made aware of them;
• fail to acknowledge, leading to potentially significant consequences when the vulnerability is realized.

Risk and time are opposite sides of the same coin; for if there were no tomorrow, there would be no risk. Growing government intervention in the private sector therefore becomes a transparent vulnerability that we have not accounted for in our identification of vulnerabilities. Time transforms risk. The nature of risk is shaped by our time horizon. In order to achieve corporate goals and objectives time horizons are established few take into account government actions. [Read more…]

Why Most ERM Systems Don’t Work

So why don’t most Enterprise Risk Management system work?  Simply, they don’t “manage” risk, they just record it.  Manage is a verb not a noun. It is activity not an item.  Making a list might be adequate for those who want to check off regulatory compliance, but it’s does not produce a ROI. [Read more…]

Guest Post by Joseph Paris (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

Wicked Problems

There are all manner of problems (being an optimist, I rather use the term “challenge”) that we face each and every day.

Most of these challenges are simple enough: what’s for dinner this eve; is there traffic on the highway that is going to impede my progress; do I have any clean underwear, and so on.  Some challenges are more complex; how are we going to meet our production schedule; my primary vendor has failed and I need to bring a replacement on-line; which automobile or house should I purchase and what are the financing options, etc…

Then there are “wicked problems”. [Read more…]

Guest Post by Joseph Paris (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

Fail Fast – Fail Small – Learn and Move On

Nobody likes to fail. Failing causes us embarrassment. Failing bruises our ego. Failing might be a dark spot on our performance assessments. All we have to do is reflect on our childhood for when we failed and how poorly we felt. Even if our parents did give us encouragement, we still felt bad about failing. Let’s face it – failing sucks. [Read more…]

Guest Post by John Ayers (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

What Does Eloquent Design Mean to You?

Eloquence has many definitions primarily applied to speaking and writing.  One definition is the art or practice of using fluent, forceful, and persuasive discourse. Over the ages, authors have variously described eloquence as “words sweetly placed and modestly directed” (William Shakespeare), “a painting of thought” (Blaise Pascal), “the poetry of prose” (William Cullen Bryant), “the appropriate organ of the highest personal energy” (Ralph Waldo Emerson), and “the art of clothing the thought in apt, significant and sounding words” (John Dryden).

I think many of these words describing eloquence can also be applied to product design.  Some examples and rational are presented below. [Read more…]

Guest Post by Greg Caroll (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

PDCA is Not Best Practice

There is a gaggle of Management Consultants pushing the 20th century mantra of Good Management Practice as a panacea to all the ill of today’s business environment. The key plank in most of these methodologies is that old chestnut “the PDCA cycle” for Continuous Improvement. If your consultant wears this as a badge, run a mile

Business Management is no longer just about Financial Accounting or Office Administration.  And Best Practice is not just someone’s vague opinion.  Leading businesses from around the world have, thru the international standards organization, put down a comprehensive set of guidelines for a broad range of Systems Management areas covering the lifecycle management Best Practices. [Read more…]

Guest Post by Geary Sikich (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

Is Your Organization’s Planning Brittle?

Good intentions do not make for the creation of a robust/resilient organization.  Business Continuity plans, Disaster Recovery plans, Emergency Response plans, etc., that are standalone documents generally reflect good intentions – whether to meet regulatory requirements or to address governance.  I would have to say that this should be a wake-up call for executives in all industries.  We live in a complex and interdependent world.  Complex systems are full of interdependencies that are hard to detect.  The result is nonlinearity in responses to events, especially random events/shocks. 

The odds of rare events are simply not computable.  Model error swells when it comes to small probabilities.  The rarer the event; the less tractable, and the less we know about how frequent its occurrence. [Read more…]

Guest Post by Jim Kline (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

Predictable Surprises: The Volkswagen Story

A predictable surprise is a risk event that in some form is known within the organization. It is of a nature that if left unresolved, it could be costly.  But fixing the problem appears to have larger short run costs, than long term benefits.  The Volkswagen diesel emissions fraud is one such example. It also a case where the penalties imposed outweighed the short term costs. Moreover, had a risk assessment occurred at several points along the way, there might not have been a scandal.  [Read more…]

Guest Post by Geary Sikich (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

What is Collateral Risk? And Why Should We Be Worried About It?

Introduction

The Law Dictionary defines Collateral Risk as:

The RISK of loss arising from errors in the nature, quantity, pricing, or characteristics of COLLATERAL securing a transaction with CREDIT RISK.  Institutions that actively accept and deliver collateral and are unable to manage the process accurately are susceptible to loss.  A subcategory of PROCESS RISK. [Read more…]

Guest Post by James Kline (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

How a Cultural Audit Can Assist Risk Management

Introduction

An organization’s culture is an important determinant of its success or failure. This is because an organization’s culture is the combined effect of the employees’ underlying assumptions, beliefs, attitudes and expectations. Each can affect performance and adaptability.  A cultural assessment can help determine areas that can inhibit mission accomplishment. This article lists the different techniques used in conducting a cultural audit and indicates how it can help guide corrective action. [Read more…]

Guest Post by Malcolm Peart (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

Project Management: A risk to Product Delivery

Most of us are aware of the old saw “the operation was successful, but the patient died!” which has been around since 1829 and used to describe medical, as well as military and business failures.  There are many reasons for failure but is ‘over-management’ one of them? Can too much ‘project management’ be applied to the point that the aim of the project, i.e. the product, is compromised? [Read more…]