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Tuesday, October 30, 2012

Importance of risk categories

So much inspiration for articles in this blog seems to come from reading what risk practitioners are writing about on the G31000 linked-In portal. One recent debate restarted an old angst on enterprise risk categories.

Personally I am a big believer in the categorisation of risk events and while this may not be popular among many of the non-banking members of the risk community, even more so with ISO 31000 practitioners, I still believe it is an important exercise to carryout. Either way, I have taken to list ten reasons why causal event categorisation is crucial for the operation of a sound enterprise risk management framework.

Wednesday, October 24, 2012

Inherent vs Residual Exposure

A recent debate on the G31000 Linked-In forum around the gap between Inherent versus Residual exposure has shown that there is a large deviation on opinion, not only with what these terms actually stand for but why it is important to measure inherent risk as a value in the first place.

Inherent Risk is actually not a new concept to risk management and is captured in many other risk standards such as COSO but for ISO 31000, the term has uniquely been excluded. This omission adds to the confusion on whether it should be used at all, let alone why someone would want to understand their Inherent and Residual risk side-by-side.

In this short blog, we are going to investigate these two terms and how they interrelate with each other, why and importantly how inherent risk can be estimated. 

Tuesday, October 23, 2012

The Risk Clock

Some things come in cycles is a common saying I am sure we have all heard before. This seems to be even more so the case when we are presented with a complex disorder which is stubborn to stamp out. We will have moments when everything looks fine, only to be presented with a set of known preconditions over and over again that result in what we thought was under control suddenly being less so.

Are risks more seasonal than we would like to first imagine?

Friday, October 5, 2012

The Dark Side of Risk Management

Risk management can be a paradox in nature and this often leads entire communities, perhaps society at large to entertain red herring solutions for systemic threats. 

Today I can see at least three man made ills which may be killing us broadly and as a global community they are. Long term side effects may take us to a place that is far worse than where we are at present. Perhaps we should carefully rethink what we are trying to achieve because we may just find our desperate first attempt to resolve the unwanted is often not the most ideal solution.

Shutting down Libor, disbanding nuclear power and embracing a never ending program of Quantitative Easing could have dangerous outcomes which are not really understood in the long term. Let's take a look at Quantitative Easing and Libor, we can talk about nuclear power another time.