Understanding the challenges in risk management

My good friend, Michael Rasmussen, has written what I consider a special blog post on the topic of Challenges in Risk Management.

I congratulate him for this thoughtful piece and highly recommend that you read it carefully, challenging both your and his thinking.

I agree with much of what he says, but differ a little. Here are a few points I like:

• The more we study the major problems of our time, the more we come to realize that they cannot be understood in isolation. They are systemic problems, which means that they are interconnected and interdependent.
• Applying chaos theory to business is like the ‘butterfly effect’, in which the simple flutter of a butterfly’s wings creates tiny changes in the atmosphere that could ultimately impact the development and path of a hurricane. A small event cascades, develops, and influences what ends up being a significant issue.
• Organizations take risks all the time but fail to monitor and manage these risks effectively in an environment that demands agility. Too often risk management is seen as a compliance exercise and not truly integrated with the organization’s strategy, decision- making, and objectives.
• Organizations need to understand…