World Economic Forum: "we have to avoid using yesterday’s solutions to address today’s risks" :: BBC News


Here we go again!

Another WEF report for people in and around the risk industry to pontificate and wring their hands about…without, actually, ditching "yesterday’s tools" to embrace the tools AND techniques that can benefit all of us!

“Connected systems that we thought mitigate risk are actually concentrating risk, and these are risks that we do not fully understand yet”

Steve Wilson, CRO General Insurance, Zurich

The annual WEF report is always worth reading and contains some useful infographics to reinforce key messages but, having written about reports in the preceding two years and attempted to close the moths and open the ears of "concerned professionals" I really wonder if it will take another major disaster (or two) that will need to be categorised as "Black Swan" events to justify the fact that organisations engaged in managing and mitigating risk have actually done very little but talk a good game whilst wasting time and money on deploying inadequate tools and trying to predict the future…

"Severe income inequality" is the biggest global risk, according to a panel of experts assembled by the World Economic Forum. The group points to "chronic government debt" as another problem threatening the world during the next 10 years.

The report also worries about "the dark side of connectivity"

via BBC News – World Economic Forum: Stark inequality ‘top global risk’.

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Complexity and Consequence: what financial and risk engineers MUST learn from mech. eng. (or anywhere)


Gadget craziness

Image by XuRxO via Flickr

Recently, I have found myself writing about the importance of ADAPTABILITY* & RESILIENCE in complex (business) systems. This is, partly, due to the fact that, the acceptance of the “shortcomings” of current risk models and tools, are becoming more widely “recognised” (in some instances “admitted”)!

*Boston Consulting Group recently cited “Adaptability: the new competitive advantage”.   

The number of Consultancies that – after many years of profiting from preaching the merits of (now-discredited) models and strategies – have now discovered, and wish to share, their “new found” expertise in “complexity theory” and “systems thinking”.

Unfortunately, their participation in the education process wont undo the damage done!

WE should be grateful that the damage their contribution to the prevailing culture has done is substantially reduced and that a higher level of business understanding is, increasingly, on the agenda.

However, I suspect that we have not seen the last of Consultancies promoting and implementing “solutions” that make (business)  systems and economies more fragile…because there are fees to be earned! Read more of this post

Governance–Risk–Compliance: accept responsibility to reap the rewards!


We know we can’t make reliable predictions about our environment..but it doesn’t stop us from spending enormous amounts of money to do so. Then to pay for the consequences of getting it wrong!

Introspection needs to get serious and, to do so, go beyond, “how can we improve our margins?” Apparently we don’t like to indulge in too much self-analysis, even though identifying and addressing “flaws” at source makes so much more sense. We can influence, manage or control what we do, why and how we do it. There is very little we can influence outwith our immediate environment. BusinessRisks

To put this into a business context and convey the message about how complex any business can become, consider the following table:

If this is insufficient to convince you that there are enough risks associated with behaviour to be getting on with please consider how many of these could be addressed by a robust Operational structure!

If you still have doubts, perhaps this extract, from a very interesting paper, will help. It was the result of a collaboration between US National Academies/National Research Council and the Federal Reserve Bank of New York on an initiative to “stimulate fresh thinking on systemic risk”.

Catastrophic changes in the overall state of a system can ultimately derive from how it is organized — from feedback mechanisms within it, and from linkages that are latent and often unrecognized Read more of this post

Survival in the Age of Complexity | World Economic Forum


Official logo of the World Economic Forum.

Image via Wikipedia

My only excuse for missing out on this update from Klaus Schwab (World Economic Forum), following the Global Risks Report 2011, is that I was only holiday (and am still paying the price)!

Bearing in mind that we all share the same planet, their findings are relevant to each and every one of us (and our children) BUT, if you are involved in the “risk business” what will be your excuse for failing to heed the warnings???

I would also like to point out to any readers (particularly, in the unlikely event that someone involved in WEF or with preparing the report) that, whilst inter-connectedness and complexity are identified within and between “domains”: Read more of this post