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Decision Making Under Deep Uncertainty

October 20, 2014

The above is a part of the title of a World Bank report.  The full title of that report is Investment Decision Making Under Deep Uncertainty – Application to Climate Change While that report focuses upon that one specific activity – Investing, and one area of deep uncertainty – Climate Change, there are some very […]

Future Uncertainty

April 16, 2013

Often called emerging risks. Going back to Knight’s definitions of Risk and Uncertainty, there is very little risk contained in these potential situations.  Emerging risks are often pure uncertainty.  Humans are good at finding patterns.  Emerging risks are breaks in patterns. What to Do about Emerging Risks… Emerging risks are defined by AM Best as […]

Modeling Uncertainty

March 31, 2011

The message that windows gives when you are copying a large number of files gives a good example of an uncertain environment.  That process recently took over 30 minutes and over the course of that time, the message box was constantly flashing completely different information about the time remaining.  Over the course of one minute […]

Getting a Handle on Uncertainty

February 11, 2011

Frank Knight looked for the reason why firms are able to make a profit (in perfect competition situations that is) and he ultimately decided that firms were paid for UNCERTAINTY.  He then went on to distinguish uncertainty from risk.  Risk is the toss of the dice.  With risk, the frequency & severity distribution of possible […]

How to manage Risk in Uncertain Times

June 8, 2017

The biologist Holling saw that natural systems went through phases.  One view of those four phases is: Rapid Growth  Controlled Growth Collapse Reorganization The phase will usually coincide with an environment that encourages that sort of activity.  The fourth phase, Reorganization, coincides with an Uncertain environment. Since the financial crisis of 2008, many aspects of […]

Top 10 RISKVIEWS Posts of 2014 – ORSA Heavily Featured

December 29, 2014

RISKVIEWS believes that this may be the best top 10 list of posts in the history of this blog.  Thanks to our readers whose clicks resulted in their selection. Instructions for a 17 Step ORSA Process – Own Risk and Solvency Assessment is here for Canadian insurers, coming in 2015 for US and required in […]

Hierarchy Principle of Risk Management

September 8, 2014

The purpose of ERM is NOT to try to elevate all risk decisions to the highest possible level, but to master discerning the best level for making each risk decision and for getting the right information to the right person in time to make a good risk decision. This is the Hierarchy Principle as it […]

Ingram Looks into ERM – Eight short articles.

December 17, 2013

The magazine of the Society of Actuaries published eight short essays on a variety of ERM topics. Making Risk Models Collaborative   With our risk models, we make the contribution of managers to the risk management of the company disappear into the mist of probabilities. And then we wonder why so many managers are opposed to “letting […]

Ignoring a Risk

October 31, 2013

Ignoring is perhaps the most common approach to large but infrequent risks. Most people think of a 1 in 100 year event as something so rare as it will never happen. But just take a second and look at the mortality risk of a life insurer.  Each insured has on average around a 1 – […]

Hit Me!

October 23, 2013

RISKVIEWS just noticed that this blog had exactly 150,000 hits as of today! In the scheme of things on the web that is an extremely small number.  But this is a blog about risk management that has no particular marketing scheme, not any idea of making anyone any money.   RISKVIEWS also writes for the WillisWire […]

Resilience for the Default

October 17, 2013

In a speech given at the NY Stock Exchange, RISKVIEWS said that there are four paths to Resilience, depending upon the economic environment: Boom – During the boom, the best resilience strategy is to grow! Bust – Triage is the strategy best-suited resilience strategy for the bust. Moderate – During the moderate phase steadily improving […]

Four Components of Resilience

July 13, 2013

Excerpt from The Resilience Renaissance Resilience thinking requires an acknowledgement of the fact that systems must learn to live with uncertainty and that change is inevitable. ‘“Expecting the unexpected” is an oxymoron, but it means having the tools and the codes of conduct to fall back on when an unexpected event happens’; these tools and […]

Make a seat at the table

July 5, 2013

The report of the Parliamentary Commission on Banking Standards titled “Changing banking for good” makes many bold statements about what is wrong with banking but stays very much in the area of timid when making recommendations for changes.  Most of which seem very much like the exercize of “rearranging the deck chairs on the Titanic”.  […]

ERM Control Cycle

April 20, 2013

The seven principles of ERM for Insurers can be seen as forming an Enterprise Risk Control cycle. The cycle starts with assessing and planning for risk taking.  That process may include the Diversification principle and/or the Portfolio principle. Next to the steps of setting Considerations and Underwriting the risks.  These steps are sometimes operated together […]

Getting Paid for Risk Taking

April 15, 2013

Consideration for accepting a risk needs to be at a level that will sustain the business and produce a return that is satisfactory to investors. Investors usually want additional return for extra risk.  This is one of the most misunderstood ideas in investing. “In an efficient market, investors realize above-average returns only by taking above-average […]

Delusions about Success and Failure

April 8, 2013

In his book, The Halo Effect: … and the Eight Other Business Delusions That Deceive Managers, author Phil Rosenzweig discusses the following 8 delusions about success: 1. Halo Effect: Tendency to look at a company’s overall performance and make attributions about its culture, leadership, values, and more. 2. Correlation and Causality: Two things may be […]

Risk and Return – A Balancing Act

April 5, 2013

From Max Rudolph There are similarities between value investing and enterprise risk management (ERM) methods. For some, especially portfolio managers, this may be obvious. These investors come to the table with experience using risk as a constraint while trying to optimize returns. Years of experience have taught this group that risk balances return, and that […]

Real Resilience is not what you think it is

January 30, 2013

There is confusion about the term Resilience.  To many people, it means the ability to withstand stress. To some people, the ultimate resilience comes from thick walls (or huge capital requirements).  The picture above is one of many thousands like it that shows the ultimate result of seeking resilience in a static manner. The dictionary […]

Principles of ERM for Insurance Organizations

December 16, 2012

RISKVIEWS has published this list before.  You will notice that it is different from many other lists of the parts of ERM.  That is because we do not presume that there is some sort of risk management process already in place that “automatically” takes care of several of these things.  Many writers implicitly make that […]

Getting Started in a Risk Management Career

November 10, 2012

RISKVIEWS got an email request… I am a senior ‘Risk Management & Insurance’ and ‘Finance’ double major at Butler University. I was wondering if you would be able to lend some advice for my future career endeavors. One question is “what made you chose the consulting risk management side over more of a singular corporation […]

What is Risk?

January 12, 2012

from Max Rudolph As I deal with a variety of industries, professionals, investors and even risk managers, it has become obvious that the first issue that needs to be addressed from a risk management context is to define the term “risk”. I generally get pushback on this, but what I find is that everyone has […]

ERM Mission Statements

January 10, 2012

From the Annual Reports: A.     Risk management is a key part of our corporate management. Its task is not only to safeguard the Group’s financial strength in order to satisfy our obligations to clients and create sustained value for our shareholders, but also to protect Munich Re’s reputation. We achieve these objectives through global risk […]

What’s Your Philosophy?

December 15, 2011

Strategic Risk Magazine has a piece with interviews of a dozen risk managers.  Once question was “What’s Your Philosophy?”  Here are the answers that they received: Risk management is a fantastic career opportunity as it gives people a very broad and deep perspective on the business through strategic and operational involvement, dealing with people at […]

The Danger of Optimization

November 21, 2011

RISKVIEWS was recently asked “How do insurers Optimize Risk and Reward?” The response was “That is dangerous. Why do you want to know that?” You see, a guru must always answer a question with a question. And in this case, RISKVIEWS was being treated as a guru. Optimizing risk and reward is dangerous because it […]

What’s Next?

October 27, 2011

Buttonwood suggests that there are four paths forward from the global debt crisis: Grow out of the problem Inflate the debt to a more manageable level Default Extended Stagnation These four paths happen to coincide exactly with the four views of risk from Plural Rationalities. The Maximizer will be sure that we can just Grow […]

You need to know how much risk you’ve been taking first

September 15, 2011

Everyone struggles with choosing a risk appetite.  But that is the first mistake.  Risk appetite will not be singular.  Risk Appetite is plural.  It refers to any aspect of risk that goes beyond what you will comfortably accept. In the paper Risk and Light, it mentions a number of aspects of risk: Type A Risk […]

ERM Discosure

August 18, 2011

Here is a tip from the IRMI about how to get started with a new ERM program: ✓ If you are a public company, begin by asking the person or group that identifies risks for SEC reports to also identify the top three corrective actions for the next quarter. Update the list quarterly. That sounds […]

Is there a “Normal” Level for Volatility?

August 10, 2011

Much of modern Financial Economics is built upon a series of assumptions about the markets. One of those assumptions is that the markets are equilibrium seeking. If that was the case, it would seem that it would be possible to determine the equilibrium level, because things would be constantly be tugging towards that level. But […]

Cavalcade of Risk

June 16, 2011

If you, like Riskviews, enjoys reading about risk, you will love the Cavalcade of Risk.  The Cavalcade of Risk focuses on how people and businesses deal with the element of uncertainty in their lives, weekly presenting a wide ranging list of links to blogs and other places where all different aspects of risk are being […]

Major Regime Change – The Debt Crisis

May 24, 2011

A regime change is a corner that you cannot see around until you get to it.  It is when many of the old assumptions no longer hold.  It is the start of a new set of patterns.  Regime changes are not necessarily bad, but they are disruptive.  Many of the things that made people and […]

Dissappointment

April 12, 2011

Michael Thompson often describes the situation where a person or group does not get the experience that they expect as Surprise. I have also heard that called Disappointment. Probably Surprise is a better term. What is going on is that people expect one sort of experience and get another. In a recent published article, Ingram […]

Assessing Risk Capacity Utilization

March 7, 2011

by Jean-Pierre Berliet In practice, the risk tolerance constraints (i.e. maximum expected default probability at the company’s target rating) of rating agencies determine the minimum amount of capital that a company needs to secure the rating it needs to execute its strategic plan on a going concern basis. When a company’s available capital is higher […]

Outsourcing Risk

February 16, 2011

Last week the Seattle Times had an incredible story about the ultimate costs of a failed outsourcing strategy at Boeing. The story quotes Wall Street sources to say that ultimately the failure of outsourcing partners created $12 Billion of extra costs on a project initially planned to cost $5 Billion. “We spent a lot more […]

Sins of Risk Measurement

February 5, 2011

. Read The Seven Deadly Sins of Measurement by Jim Campy Measuring risk means walking a thin line.  Balancing what is highly unlikely from what it totally impossible.  Financial institutions need to be prepared for the highly unlikely but must avoid getting sucked into wasting time worrying about the totally impossible. Here are some sins […]

Risk Environment

January 10, 2011

It seems that there are three approaches to how to look at the riskiness of the future when assessing risk of a specific exposure: Look at the “long term” frequency and severity and look at risk based upon assuming that the near term future is a “typically” risky period. Look at the market’s current idea […]

Financial Reform & Risk Management (2)

September 12, 2010

An AP summary of the negotiated consolidated Financial Reform act of 2010, there are 9 major provisions.  These posts will feature commentary on the Risk Management implications of each. 2. CONSUMER PROTECTION A Consumer Financial Protection Bureau within the Federal Reserve would police lending, taking powers now exercised by various bank regulators. The current financial […]

An Unusually Uncertain Economy

August 13, 2010

Economists sometimes admit that the economy has different phases.  I think that they are now up to three:  Boom, Bust and Normal. Most of the Economics literature of the past 30 years relates solely to the Normal environment. There may be economics literature relating to the Boom phase, but who would know.  No one ever […]

18,000 in a year

August 1, 2010

That’s how many different pageviews there have been of Riskviews in the first year of operation as a blog.  The best month in that first year was the last month, July 2010. Thanks.  This will continue. Riskviews is one of 141 million blogs operating on the web.  Riskviews has stayed on its theme of Risk […]

Uncertain Decisions

June 7, 2010

All ERM and Risk Management activity should be judged in terms of how well they support important decisions.

Lessons for Insurers (6)

May 25, 2010

In late 2008, the The CAS, CIA, and the SOA’s Joint Risk Management Section funded a research report about the Financial Crisis. This report featured nine key Lessons for Insurers. Riskviews will comment on those lessons individually… 6. Insurers must pay special attention to high growth/profit areas in their companies, as these are often the […]

Much Worse than Anticipated

May 5, 2010

Arianna Huffington recently pointed out that time and time again, the crises that we face turn out to be Much Worse than We thought it would be. And she has a good point there.  One that is important for risk managers to contemplate.  One that we are often asked after a major loss… Why did your risk […]

Lessons for Insurers (5)

April 26, 2010

In late 2008,  the The CAS, CIA, and the SOA’s Joint Risk Management Section funded a research report about the Financial Crisis.  This report featured nine key Lessons for Insurers.  Riskviews will comment on those lessons individually… 5. It is important to develop a counterparty risk management system and establish counterparty limits. Insurers need to […]

Skating Away on the Thin Ice of the New Day

April 23, 2010

The title of an old Jethro Tull song.  It sounds like the theme song for the economy today! Now we all know.  The correlations that we used for our risk models were not reliable in the one instance where we really wanted an answer. In times of stress, correlations go to one. That is finally, […]

Burn out, Fade Away …or Adapt

February 27, 2010

When I was a kid in the 1960’s, I was sick and tired of how much time on TV and movies was taken up with stories of WWII.  Didn’t my parent’s generation get it?  WWII was ancient history.  It was done.  Move on.  Join the real world that was happening now. From that statement, you […]

Risk Intelligence

December 20, 2009

Nick sent out a link to a test that you can take that measures Risk Intelligence http://www.projectionpoint.com/ Try it…  I believe that it does give some insight to a different aspect of intelligence that is needed for good risk management. I would not say that it suggests anything new.  In fact, it seems to link […]

Reflexivity of Risk

November 19, 2009

George Soros says that financial markets are reflexive.  He means that the participants in the system influence the system. Market prices reflect not just fundamentals, but investors expectations. The same thing is true of risk systems.  This can be illustrated by a point that is frequently made by John Adams.  Seat belts are widely thought […]

RISK USA Conference – October 2009

October 29, 2009

Many, many good questions and good ideas at the RISK USA conference in New York.  Here is a brief sampling: Risk managers are spending more time showing different constituencies that they really are managing risk. May want to change the name to “Enterprise Uncertainty Management” Two risk managers explained how their firms did withdraw from […]

What is RISK?

October 12, 2009

I have started to get bothered by the way that the word RISK is used to mean almost anything – noun verb adjective. It makes it almost impossible to understand what someone is trying to say about a risk or risk management topic.  I am probably even more guilty than most.  I was once told […]

ERM Role in Implementing a Winning Acquisition Strategy (2)

October 8, 2009

From Mike Cohen Part 2 (Part 1) Execution of an Acquisition Strategy Goes Through Several Stages and Involves Many and Varied Complex, Interrelated Business Issues (they must be performed well, and there are numerous junctures where things can go awry … suggesting that many potential risks need to be addressed, and more effectively than they […]

Law of Risk & Light

October 7, 2009

Risk management is all about making conscious decisions about risk taking.  Fully recognizing the potential losses that could result from a risky undertaking.  But in many camps, risk management is being simplified and simplified to a point where it may well mislead CEOs and Boards about the potential effectiveness of an oversimplified risk management regime. […]