Risk Management Quotes

Do you collect great quotes that you hear?  Or do you wish you had remembered who said that and exactly what they said?  Please post your quotes here and any questions – searching for quotes that you sort of half remember.  Let’s try to stay to quotes related to risk management please, but we will look the other way for particularly good entries that are slightly off topic.

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337 Comments on “Risk Management Quotes”

  1. riskviews Says:

    Everybody’s lost but me.
    Indiana Jones and the Last Crusade

  2. riskviews Says:

    I found that if you have a goal, that you might not reach it. But if you don’t have one, then you are never disappointed. And I gotta tell ya… it feels phenomenal.
    from Dodgeball the movie

  3. riskviews Says:

    “Risk is the factor of a stratagem measured by what man is powerless to control.”
    ― Mike Norton, White Mountain

  4. riskviews Says:

    “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy…your main constituencies are your employees, your customers and your products”. Jack Welsh

  5. riskviews Says:

    “Knowing is not enough; we must apply. Willing is not enough; we must do.”

    Johann Wolfgang von Goethe

  6. riskviews Says:

    Handing off full responsibility for the bank’s enterprise risk management is the wrong reason to have a CRO. The result is likely to be an expensive compliance bureaucracy that creates a false sense of security. Russ Banham

  7. riskviews Says:

    Complexity is the enemy of transparency and complexity is not a good thing in finance.
    Hank Paulson

  8. riskviews Says:

    To our knowledge, no macro stress test carried out ahead of the crisis identified the build-up of vulnerabilities. The message was overwhelmingly: “The system is sound”. Rather than being part of the solution, stress tests turned out to be part of the problem. They lulled policymakers and market participants into a false sense of security. There is a serious risk that, unless their limitations are fully understood, they will continue to do so in the future.

    Claudio Borio, Mathias Drehmann and Kostas Tsatsaronis

  9. riskviews Says:

    We are just looking in the wrong places, expecting the future to resemble the past.
    John Mauldin

  10. riskviews Says:

    Thus when all things are considered, it will be found best for the Nation to leave the Borrowers and the Lender to make their own Bargains, according to the Circumstances they lie under; and in so doing you will follow the course of the wise Hollanders, so often quoted on this account: and the consequences will be, that when the Nation thrives, and grows rich, Money will be to be had upon good terms, but the clean contrary will fall out, when the Nation grows poorer and poorer.
    Dudley North 1691

  11. riskviews Says:

    The corporate governance of large banks was characterized by the creation of Potemkin villages to give the appearance of effective control and oversight.
    Parliamentary Commission on Banking Standards Report (June 2013)

  12. riskviews Says:

    Computer models alone can no longer calculate meaningful probabilities about what will happen next in the eurozone. Instead, what really matters now in places ranging from Finland to Greece are non-quantitative issues such as political values, social cohesion and civic identity. Above all, the question of “credit” is key to working out whether bonds can ever be repaid. But this is not credit in the mathematical sense by which banks have often defined it (as a projected probability on a chart), but in the old fashioned, Latin – social – meaning (belief). The crucial variable, in other words, is whether voters have faith in their governments and central banks. Do they trust the safety of their banks? Are citizens willing to trust each other, and co-operate, when pain is imposed?
    Gillian Tett

  13. riskviews Says:

    Models themselves can provide tremendous insight, but they also can be, if not necessarily misused, certainly misunderstood. People can lose track of the fact that just because your model says you don’t have any risk, and you are running a very large balance sheet with a tremendous amount of leverage, it doesn’t necessarily mean that you should feel comforted. Internal models really need to be augmented by strong risk management capabilities, by individuals with experience who won’t just take models for granted, but actually take a look and see very large numbers and regardless of what the market is doing just ask the question: Does it make sense?
    Tom Wilson

  14. riskviews Says:

    He who is not courageous enough to take risks will accomplish nothing in life.

    Muhammad Ali

  15. riskviews Says:

    “From a risk perspective, it’s a challenging operating environment; the financial and credit markets are still brittle, economic recovery fragile and excess capacity in the insurance industry is driving competitive behaviour. Our risk management priorities remain to partner with the business and ensure we provide them with the right decision-support tools to identify and assess risk and the risk-reward framework to make those decisions.”
    Sean Ringsted

  16. riskviews Says:

    “Speed is irrelevant if you are going in the wrong direction.”
    M. Gandhi

  17. riskviews Says:

    “By far the most important lesson Mississippi has learned [from Huricane Katrina] is the value of preparedness.”
    — Mississippi Gov. Phil Bryant

  18. riskviews Says:

    For a central risk function, whether that is in a group centre or in a local company, one of the very important points is to strike a balance between the control aspect to your work and the support aspect to the business.
    Pierre Joos

  19. riskviews Says:

    “The economic crisis has put into question many of our beliefs. We have to accept the intellectual challenge.”
    Olivier Blanchard IMF Chief Economist (2011)

  20. riskviews Says:

    There’s no lone genius who figures it all out and sends down the magic formula.

    Jeff Bezos

  21. riskviews Says:

    “…those who like facts generally don’t like rigid ideologues.”

    Daniel Tracht

  22. riskviews Says:

    Managing an organization’s risks in individual silos is like trying to pick up a six-pack without the little plastic thingy that holds them all together; you can do it, but it is far harder than it would be if the cans were connected to each other.
    Andrew Bent

  23. Prof. Ray Says:

    Most people (corporation -(s) ) never think of sustainable risk management pragmatically unless they start losing money…some exploit loopholes and damn the consequences, some prefer to pay huge fines when caught because they know the limit (remit) of the law… some even consult with their lawyers before exploiting unethical loopholes… whois to be blamed…?

    What is your take on this…?
    Are you entangle in one of these fallacy web of narcissism?
    Don’t be the next ponzi, Bernie…etc…

    • riskviews Says:

      Perhaps it is a fundamental flaw in the ownership/governance model of the modern joint stock company. The owners have no real interest in the long term health of a firm – just an interest in what they can get out of holding a stock for a short period. The problems may be containable with some tweaks to regulations, but will not be solved until we stop our economy from being run by these extreme short term interests.

  24. riskviews Says:

    Investors were never ‘rational’ as defined by standard finance. They were ‘normal’ in 1945, and they remain normal today.
    M Statman

  25. riskviews Says:

    sometimes, I’ve believed as many as six impossible things before breakfast.
    Lewis Carroll

  26. riskviews Says:

    “Management that is destructively critical when mistakes are made kills initiative. And it’s essential that we have many people with initiative if we are to continue to grow.”
    William McKnight

  27. riskviews Says:

    There is a continuum between certainty and uncertainty, just as there is between factors inside and outside of our control. By studying the uncertain, we may be able to break it down into elements of greater and lesser risk, of greater and lesser predictability. In the same way, between absolute control and absence of control lies the middle ground of influence and persuasion.

    Chantell Ilbury & Clem Sunter (Mind of a Fox)

  28. riskviews Says:

    Thus we may say that there is an expanding funnel of doubt. The contours of the funnel vary with each one of us, for the concept is personal. Nevertheless, they must inevitably have much in common, since they all start from a common point now.

    If we could give numerical values to our uncertainties we could construct a probability dispersion table. For example, we might say that the probability that in 1960 the rate of interest will lie between 31/2% and 4¼% is .15, We cannot, of course, do this in practice. Yet the expanding funnel of doubt is in the background of our thoughts not only in regard to interest but also in regard to the other factors: mortality, expenses, taxation.

    FM Redington (1952)

  29. riskviews Says:

    Banking history is littered with examples of manipulative conduct driven by misaligned incentives, of bank failures born of reckless, hubristic expansion and of unsustainable asset price bubbles cheered on by a consensus of self-interest or self delusion.
    An important lesson of history is that bankers, regulators and politicians alike repeatedly fail to learn the lessons of history: this time, they say, it is different.

    From the report of the Parliamentary Commission on
    Banking Standards (2013)

  30. riskviews Says:

    A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.

    - Douglas Adams, The Hitchhiker’s Guide to the Galaxy

  31. Ric Bahr Says:

    There is no such thing as IDIOT PROOF.

  32. riskviews Says:

    It is not a crime to be a lousy manager, a failed risk taker or to lose simply boat loads of money. Many of our most prominent CEOs have done the same.
    Holman Jenkins, WSJ 27 April, 2013

  33. riskviews Says:

    Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits — of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.
    JM Keynes

  34. riskviews Says:

    I believe now that successful investment depends on three principles:
    (1) a careful selection of a few investments (or a few types of investment) having regard to their cheapness in relation to their probable actual and potential intrinsic value over a period of years ahead and in relation to alternative investments at the time;
    (2) a steadfast holding of these in fairly large units through thick and thin, perhaps for several years, until either they have fulfilled their promise or it is evident that they were purchased on a mistake;
    (3) a balanced investment position, i.e. a variety of risks in spite of individual holdings being large, and if possible opposed risks (e.g. a holding of gold shares amongst other equities, since they are likely to move in opposite directions when there are general fluctuations)

    JM Keynes

  35. riskviews Says:

    I am as certain as certain can be— that a financial community with a more even balance between men and women, young and old, could not possibly do any worse than the system we have now.

    Coates, John (2012-06-14). The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust

  36. riskviews Says:

    It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain.
    John Maynard Keynes
    The General Theory of Employment, Interest and Money

  37. riskviews Says:

    Of the many elemental flaws in macroeconomic practice is the true observation that the economic variables in which we might be most interested happen to be those which lend themselves least to measurement. Thus, the statistics which we take for granted and band around freely with each other measuring such ostensibly simple concepts as inflation, wealth, capital and debt, in fact involve all sorts of hidden assumptions, short-cuts and qualifications. So many, indeed, as to render reliance on them without respect for their limitations a very dangerous thing to do.
    Dylan Grice

  38. riskviews Says:

    While its original approval document indicated that the SCP was created with a hedging function in mind, the bank was unable to provide documentation over the next five years detailing the SCP’s hedging objectives and strategies; the assets, portfolio, risks, or tail events it was supposed to hedge; or how the size, nature, and effectiveness of its hedges were determined.

    JPMORGAN CHASE WHALE TRADES: A CASE HISTORY OF DERIVATIVES RISKS AND ABUSES
    MAJORITY AND MINORITY STAFF REPORT
    PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
    UNITED STATES SENATE

  39. riskviews Says:

    The fact was that I was not a master of my actions, because I was not so insane as to attempt to bend events to conform to my policies. On the contrary, I bent my policies to accord with the unforeseen shape of events.
    Napoleon Bonaparte

    • riskviews Says:

      Note to self: check to see when I am being “so insane as to attempt to bend events to conform with my policies”.

  40. riskviews Says:

    “Avoiding the unmanagable and managing the unavoidable”
    Title of a UN report on climate change

  41. riskviews Says:

    “Most men would rather die than think. Many do.”
    Bertram Russell

  42. riskviews Says:

    There was a lot of hand-wringing last year among CEOs who cried “uncertainty” when faced with capital allocation decisions (despite many of their businesses having enjoyed record levels of both earnings and cash).
    Warren Buffett

  43. riskviews Says:

    “Chance favors the prepared mind.” – Louis Pasteur

    “The more I practice, the luckier I get.” – Gene Sarazen

  44. riskviews Says:

    “Blessed is he who expects nothing, for he shall never be disappointed.”
    Alexander Pope

  45. riskviews Says:

    We need to “recognize that ‘we are all in sales’”

    Cheryl Feltgen, chief risk officer for the home loans division, WaMu, 2006

    • riskviews Says:

      This is not as outrageous as it might seem. In 2006, many CROs were saying similar things. Those who did not were marginalized or fired. This is a function of the Maximizers being in charge of the banks. (See Plural Rationality and ERM.)

  46. Dave Ingram Says:

    Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present.

    Marcus Aurelius

  47. Dave Ingram Says:

    The ultimate result of shielding men from folly is to fill the world with fools

    Herbert Spencer

  48. riskviews Says:

    “It is not the strongest or the most intelligent who will survive but those who can best manage change.”
    ― Charles Darwin

  49. riskviews Says:

    “a major strategy selected is not one maximizing either efficiency or a particular reward, but one which allows persistence by maintaining flexibility above all else. A population responds to any environmental change by the initiation of a series of physiological, behavioral, ecological, and genetic changes that restore its ability to respond to subsequent unpredictable environmental changes. Variability over space and time results in variability in numbers, and with this variability the population can simultaneously retain genetic and behavioral types that can maintain their existence in low populations together with others that can capitalize on opportunities for dramatic increase. The more homogeneous the environment in space and time, the more likely is the system to have low fluctuations and low resilience.”
    CS Holling

  50. riskviews Says:

    “As I write in 2012 we certainly do not believe that it is over yet, and the worst may be yet to come. Efforts by governments to solve the underlying problems responsible for the crisis have still not gotten very far, and the ‘stress tests’ that governments have used to encourage optimism about our financial institutions were of questionable thoroughness.”
    Robert Shiller

  51. riskviews Says:

    “We’re doing the right thing… Many of the bad practices of the recent past were being phased out… Regulators are trying to do too much, too fast…. We are getting an overly bad press… There is huge misinformation out there about what we are doing to get things right… We have twice as much capital as before to pad against losses… We help clients raise money for socially-important projects in schools and hospitals…”

    “Businesses can be opaque. They are complex. You don’t know how aircraft engines work either.”

    Jamie Dimon at Davos 2013

  52. riskviews Says:

    “Outperforming the market with low volatility on a consistent basis is an impossibility. I outperformed the market for 30-odd years, but not with low volatility.”
    George Soros

  53. riskviews Says:

    “Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. “Look, those are the bankers’ and brokers’ yachts. ‘Where are all the customers’ yachts?’ asked the naïve visitor.”

    Fred Schwed (circa 1940)

  54. riskviews Says:

    “You cannot allow any of your people to avoid the brutal facts. If they start living in a dream world, it’s going to be bad.”

    General James “Mad Dog” Mattiss

    Read more: http://www.businessinsider.com/general-maddog-mattiss-best-quotes-2013-1?op=1#ixzz2J0Vx39mV

  55. riskviews Says:

    AIG’s “models are guided by a few, very basic principles, which are designed to make them very robust and to introduce as little model risk as possible. We always build our own models. Nothing in our business is based on buying a model or using a publicly available model.”
    Gary Gorton –Dec. 5, 2007, AIG investor meeting

  56. riskviews Says:

    The problem of the use of statistical tools and theorems comes from the people that try to domesticate the randomness within certain events and variables by the use of certain assumptions that would be difficult to satisfy. Thus, the results obtained while using a model without data that satisfies the assumptions are, naturally, wrong. Furthermore, the design of this models does not grant protection against randomness or the consequences of a black swan event.

    Carlos Castro Correa

    • riskviews Says:

      Really like the phrase at the end of this quote, which is here modified to say
      “Models do not grant protection against uncertainty or the consequences of a black swan event”

  57. riskviews Says:

    We cannot, indeed, imagine our own death; whenever we try to do so we find that we survive ourselves as spectators. The school of psychoanalysis could thus assert that at bottom no one believes in his own death, which amounts to saying: in the unconscious every one of us is convinced of his immortality. Sigmund Freud

    • riskviews Says:

      Imagining the death of the company is at the heart of ERM. This creates a huge barrier to risk management, especially when chief executives are founders. The separation between themselves and their company is often weak. So these execs will not be able to imagine the death of their company.

  58. riskviews Says:

    “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” John Kenneth Galbraith

  59. riskviews Says:

    My concern with risk management is that many (not all) risk professionals are trying to redefine risk management to make it something broader than it actually is.

    Michael Rassmussen
    http://www.grc2020.com/?p=1248

  60. riskviews Says:

    It is clear that for the large majority of individual investors, taking a shower and doing nothing would have been a better policy than implementing the ideas that came to mind.

    Daniel Kahneman

    Read more: http://www.businessinsider.com/terry-odean-on-stock-picking-2012-12#ixzz2G0b7ZLZk

  61. riskviews Says:

    Facts that challenge such basic assumptions—and thereby threaten people’s livelihood and self-esteem—are simply not absorbed.

    Daniel Kahneman

    Read more: http://www.businessinsider.com/daniel-kahneman-on-wealth-management-2012-12#ixzz2FyXeUrDe

  62. riskviews Says:

    Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s “invisible hand” that is unredeemably opaque. With notably rare exceptions (2008, for example), the global “invisible hand” has created relatively stable exchange rates, interest rates, prices, and wage rates.
    Alan Greenspan

    • riskviews Says:

      Other things that are similarly true:
      With notably rare exceptions, Newt Gingrich is a loyal and faithful husband.

      With notably rare exceptions, Japanese nuclear reactors have been secure from earthquakes.

      Though unredeemably(sic) opaque, Mr. Madoff’s operations delivered excellent returns, with notably rare exceptions.

      With notably rare exceptions, the levees protecting New Orleans have held fast in the face of major hurricanes.

      With notably rare exceptions, locking all exits to the workplace is a harmless way to improve your employees’ productivity.

      With notably rare exceptions, petroleum extraction has minimal environmental impact.

      From Henry Farrell http://crookedtimber.org/2011/03/30/with-notably-rare-exceptions/

  63. riskviews Says:

    “Chance is commonly viewed as a self-correcting process in which a deviation in one direction induces a deviation in the opposite direction to restore the equilibrium. In fact, deviations are not “corrected” as a chance process unfolds, they are merely diluted.”
    ― Amos Tversky

  64. riskviews Says:

    In summary, neither our model projections for the 21st century nor our analyses of trends in Atlantic hurricane and tropical storm counts over the past 120+ yr support the notion that greenhouse gas-induced warming leads to large increases in either tropical storm or overall hurricane numbers in the Atlantic. A new modeling study projects a large (~100%) increase in Atlantic category 4-5 hurricanes over the 21st century, but we estimate that this increase may not be detectable until the latter half of the century.
    Thomas Knutson (NOAA)

  65. riskviews Says:

    “We believe that effective risk management is critical to the success of our business and is the responsibility of all of our employees. All of our employees are risk managers. Employees are expected and encouraged to escalate incidents and any matters of concern to management and to our compliance and risk departments in order to effectively manage risk. Consequently, we have established — and continue to evolve and improve — a global enterprise wide risk management framework that is intended to manage all aspects of our risks.”

    MF Global 2011 10K

  66. riskviews Says:

    “You cannot teach a man anything; you can only help him discover it in himself.”
    “All truths are easy to understand once they are discovered; the point is to discover them.”
    Galileo Galilei

  67. riskviews Says:

    “I have never seen dependable calculations made about common stock values, or related investment policies, that went beyond simple arithmetic or the most elementary algebra. Whenever calculus is brought in, or higher algebra, you could take it as a warning signal that the operator was trying to substitute theory for experience, and usually also to give to speculation the deceptive guise of investment.”
    Ben Graham


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