Risk Risk Analysis
The other day, my boss asked me for the risk risk analysis report. You know, the one that shows the ratio between risk and risk for all of the activities of the firm. We are planning to make some important strategic decisions and we want to make sure that we are planning for enough risk, but do not want to be exposed to too much risk.
This report is being prepared for the Chief Marketing officer. Her job is to make sure that the company meets its risk goals each quarter, while the Chief Risk Officer is responsible for making sure that she does not expose the company to too much risk while doing that.
Of course, no one actually talks like that. But many risk managers will adamantly claim that the definition of Risk must include both upside and downside. That is usually followed with a statement about the importance of Risk and Reward management. They do not seem to notice that it only took them one sentence to go back to the old definition of risk as downside potential.
There is nothing wrong with having risk and reward as separate ideas. In fact, that is pretty much how the English language works. Risk Managers who are trying to force people to think otherwise are fighting a losing battle. And they actually lose it with the words out of their own mouth, thereby appearing foolish.