The Yin and Yang of Risk

Guest Post By Chris Mandel

One thing I’ve discovered in the last year is that extremes seem to be the rule of thumb these days.

The obvious example is that which represents the more significant aspects of the current financial crisis; huge amounts of mortgage defaults; unfathomable aggregations of loss in credit default swaps; inordinate quantums of market confidence destruction and the resulting 50 percent portfolio reductions in the wake, etc, etc.

In recent years it has been reflected in the more traditional insurable risk realm with record-setting natural catastrophe seasons and increasingly severe terrorism events. The fundamental insurance concept of pooling and sharing risk for profitable diversification is threatened. Even the expected level of loss is growing increasingly unexpected in actual results.

Examining the risk discipline and its evolving practice, I see management by extremes beginning to subsume the norm. So here are some examples of how this looks.

Reams of Data–Little Data Intelligence: We have tons of “risk” related data but limited ability to interpret it and use it in order to head off losses that were ostensibly preventable or at least reducible.

Continued at Risk and Insurance

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