Risk = Probability X Consequences. Really?

“Wall Street thought it had risk all figured out…” should read that they figured out a marketing message given kudos by the number of Phd’s, MBA’s etc. employed by organisations whose appetite for individual/collective wealth and power was enabled by regulatory and credit (rating) regimes that suited the aspirations of politicians ALL at the expense of their citizens (customers) i.e. those that give them the means to function.

Their own greed and inability to continue to control information that exposed it, has been their undoing. Access to INFORMATION has enhanced our knowledge to such an extent that we have been able to recognise the MISINFORMATION that was presented as ‘knowledge and expertise’.

They created and profited from a volitile financial environment that, once globally interconnected, is beyond their control but, for as long as profits can be privatised and losses socialised, they will not suffer…until what has been ‘hidden in plain view’ can no longer be tolerated or sustained.

Time is nearly up.

Ontonix QCM Blog

Nik-Wallenda-tightroping-over-Niagara-Falls-1cv324b (image from www.impactlab.net )

Probably the most frequently used definition of risk is this one:

Risk = the Probability of something happening X resulting Cost/Consequences

This definition is flawed because of two fundamental reasons, which the formula itself suggests very eloquently:

1. Estimation of probabilities of future events is very difficult (while it is considerably easier when talking of past events). Rare events have very low probabilities and these are extremely difficult to estimate due to the fact that the sample of available data is very small (what is the probability of an event similar to 9/11?). Since this factor multiplies the “cost” in the above equation it is of paramount importance.

2. Estimation of the costs/consequences of these events. This is most difficult. Even after a catastrophic event it is difficult to estimate the total damage and cost.

However, the most important flaw is hidden and it is conceptual…

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Is Risk Management a Source of Risk

See on Scoop.itComplexity & Resilience

If you have risk function, however, that fully understands the business model, the deployment of its operational strategy, the sector the business operates in and the macro-economic and socio-political environment in which it operates, then they will be able to provide risk information that is relevant to the business, and can be understood by the business.

David G Wilson‘s insight:

‘Knowledge’ that fails to distinguish between practises that are based upon sound theory and those that rely upon flawed models and assumption-based modelling, do not lead to understanding but to feedback loops of unintended consequences…patterns and correlations of our own making!

Unidentified sources of risk and ill-informed (albeit well-intentioned) efforts to manage without UNDERSTANDING ‘causal relationships‘ has the opposite of the desired effect…

…unmanaged risk does not dissipate but is a source of systemic risk, mis-managed, it adds complexity is amplified through the business’ interdependencies and interactions, feeding-back as volatility and adding to uncertainty.

‘Conventional wisdom’ (or herd mentality) based upon assumptions of knowledge, can/does impair our ability to understand and address issues at source.

Before we had the tools to increase our knowledge we were ignorant but, to have the tools and not use them is dangerous and costly ineptitude!:

‘Corporate Latency’ is a significant source of, reducible, exposure in every domain and, unless it is better managed, we cannot build resilient systems or create ecosystems that can claim to be truly sustainable.

See on ontonix.blogspot.it

The Bright Marketing Manifesto:: 23 cardinal ‘rules’ of marketing

Even if you reckon you already know about marketing a well-timed reminder never did anyone any harm…and I’ll bet it has been a while since YOU sacked any customers!

In 2007 Robert Craven published his book ‘Bright Marketing’, which focus on giving the reader straightforward advice on how to improve marketing methods. Using a number of practical how-to tools you will be able to improve the way your marketing operates and ensure that your message gets heard by the right people.

via The Bright Marketing Manifesto – The Directors’ Centre Business Club.

Dilbert “does” Big Data

The thing about Scott Adams is that his finger is often more on the pulse than so many C level Exec’s and sheep with MBA’s! Somebody tell them, “size isn’t everything” and, if all you have are the same old tricks, don’t expect different results.

In the words of those well known business gurus, The Fun Boy Three & Bananarama…“it ain’t what you do it’s the way that you do it, that’s what gets results”.

Hail Dilbert!!!

Moral Warfare:: a fight that the “pure of purpose” can win


OODA (Photo credit: Wikipedia)

I gather that “The Art of War” by Sun Tzu has, once again, become a popular read. If you have read it, this may come as no great surprise as it is fair to say that, despite some “iffy” translations prior to 1910, it has stood the test of time.

But, since beheading people to establish one’s authority is frowned-upon in these politically correct times(!?), I would recommend seeking out a latter-day “master strategist” by the name of John Boyd. You may have heard talk of AGILE BUSINESS [the embedded link is for anyone in insurance] and wondered “what the hell does that mean” or dismissed it as yet another creation of fee-hungry management or IT consultants!

But hold your horses…stick around and you might learn something that could serve you and your business VERY well indeed.