vault backup: 2025-12-08 16:37:36
This commit is contained in:
@@ -0,0 +1,252 @@
|
||||
---
|
||||
id:
|
||||
aliases: []
|
||||
title: "The Failure of Risk Management: Why It's Broken and How to Fix It, Second Edition"
|
||||
tags:
|
||||
- authorship/other
|
||||
- exclude-from-word-count
|
||||
- status/incomplete
|
||||
- topic/risk
|
||||
- type/media
|
||||
authors: Douglas W. Hubbard
|
||||
publisher: John Wiley & Sons, Inc.
|
||||
type: book
|
||||
year: 2020
|
||||
---
|
||||
# The Failure of Risk Management: Why It's Broken and How to Fix It, Second Edition
|
||||
|
||||
%%
|
||||
This note, with the exception of comments like this one
|
||||
(reserved for notes on transcription)
|
||||
consists only of content from the text.
|
||||
For commentary see the companion
|
||||
[[the-failure-of-risk-management]].
|
||||
%%
|
||||
|
||||
## Part One: An Introduction To The Crisis
|
||||
|
||||
### Chapter 1: Healthy Skepticism For Risk Management
|
||||
|
||||
#### A "Common Mode Failure"
|
||||
|
||||
#### Key Definitions: Risk Management And Some Related Terms
|
||||
|
||||
#### What Failure Means
|
||||
|
||||
#### Scope And Objectives Of This Book
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 2: A Summary Of The Current State Of Risk Management
|
||||
|
||||
#### A Short And Entirely-Too-Superficial History Of Risk
|
||||
|
||||
#### Current State Of Risk Management In The Organization
|
||||
|
||||
#### Current Risks And How They Are Assessed
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 3: How Do We Know What Works?
|
||||
|
||||
#### Anecdote: The Risk Of Outsourcing Drug Manufacturing
|
||||
|
||||
#### Why It's Hard To Know What Works
|
||||
|
||||
#### An Assessment Of Self-Assessments
|
||||
|
||||
#### Potential Objective Evaluations Of Risk Management
|
||||
|
||||
#### What We May Find
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 4: Getting Started: A Simple Straw Man Quantitative Model
|
||||
|
||||
#### A Simple One-For-One Substitution
|
||||
|
||||
#### The Expert As The Instrument
|
||||
|
||||
#### A Quick Overview Of "Uncertainty Math"
|
||||
|
||||
#### Establishing Risk Tolerance
|
||||
|
||||
#### Supporting The Decision: A Return On Mitigation
|
||||
|
||||
#### Making The Straw Man Better
|
||||
|
||||
#### Note
|
||||
|
||||
## Part Two: Why It's Broken
|
||||
|
||||
### Chapter 5: The "Four Horsemen" Of Risk Management: Some (Mostly) Sincere Attempts To Prevent An Apocalypse
|
||||
|
||||
#### Actuaries
|
||||
|
||||
#### War Quants: How World War II Changed Risk Analysis Forever
|
||||
|
||||
#### Economists
|
||||
|
||||
#### Management Consulting: How A Power Tie And A Good Pitch Changed Risk Management
|
||||
|
||||
#### Comparing The Horsemen
|
||||
|
||||
#### Major Risk Management Problems To Be Addressed
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 6: An Ivory Tower Of Babel: Fixing The Confusion About Risk
|
||||
|
||||
#### The Frank Knight Definition
|
||||
|
||||
#### Knight's Influence In Finance And Project Management
|
||||
|
||||
#### A Construction Engineering Definition
|
||||
|
||||
#### Risk As Expected Loss
|
||||
|
||||
#### Defining Risk Tolerance
|
||||
|
||||
#### Defining Probability
|
||||
|
||||
#### Enriching The Lexicon
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 7: The Limits Of Expert Knowledge: Why We Don't Know What We Think We Know About Uncertainty
|
||||
|
||||
#### The Right Stuff: How A Group Of Psychologists Might Save Risk Analysis
|
||||
|
||||
#### Mental Math: Why We Shouldn't Trust The Numbers In Our Heads
|
||||
|
||||
#### "Catastrophic" Overconfidence
|
||||
|
||||
#### The Mind Of "Aces": Possible Causes And Consequences Of Overconfidence
|
||||
|
||||
#### Inconsistencies And Artifacts: What Shouldn't Matter Does
|
||||
|
||||
#### Answers To Calibration Tests
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 8: Worse Than Useless: The Most Popular Risk Assessment Method And Why It Doesn't Work
|
||||
|
||||
#### A Few Examples Of Scores And Matrices
|
||||
|
||||
#### Does That Come In "Medium"?: Why Ambiguity Does Not Offset Uncertainty
|
||||
|
||||
#### Unintended Effects Of Scales: What You Don't Know Can Hurt You
|
||||
|
||||
#### Different But Similar-Sounding Methods And Similar But Different-Sounding Methods
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 9: Bears, Swans And Other Obstacles To Improved Risk Management
|
||||
|
||||
#### Algorithm Aversion And A Key Fallacy
|
||||
|
||||
#### Algorithms Versus Experts: Generalizing The Findings
|
||||
|
||||
#### A Note About Black Swans
|
||||
|
||||
#### Major Mathematical Misconceptions
|
||||
|
||||
#### We're Special: The Belief That Risk Analysis Might Work, But Not Here
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 10: Where Even The Quants Go Wrong: Common And Fundamental Errors In Quantitative Models
|
||||
|
||||
#### A Survey Of Analysts Using Monte Carlos
|
||||
|
||||
#### The Risk Paradox
|
||||
|
||||
#### Financial Models And The Shape Of Disaster: Why Normal Isn't So Normal
|
||||
|
||||
#### Following Your Inner Cow: The Problem With Correlations
|
||||
|
||||
#### The Measurement Inversion
|
||||
|
||||
#### Is Monte Carlo Too Complicated?
|
||||
|
||||
#### Notes
|
||||
|
||||
## Part Three: How To Fix It
|
||||
|
||||
### Chapter 11: Starting With What Works
|
||||
|
||||
#### Speak The Language
|
||||
|
||||
#### Getting Your Probabilities Calibrated
|
||||
|
||||
#### Using Data For Initial Benchmarks
|
||||
|
||||
#### Checking The Substitution
|
||||
|
||||
#### Simple Risk Management
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 12: Improving The Model
|
||||
|
||||
#### Empirical Inputs
|
||||
|
||||
#### Adding Detail To The Model
|
||||
|
||||
#### Advanced Methods For Improving Expert's Subjective Estimates
|
||||
|
||||
#### Other Monte Carlo Tools
|
||||
|
||||
#### Self-Examinations For Modelers
|
||||
|
||||
#### Notes
|
||||
|
||||
### Chapter 13: The Risk Community: Intra- And Extra-Organizational Issues Of Risk Management
|
||||
|
||||
#### Getting Organized
|
||||
|
||||
#### Managing The Model
|
||||
|
||||
#### Incentives For A Calibrated Culture
|
||||
|
||||
#### Extraorganizational Issues: Solutions Beyond Your Office Building
|
||||
|
||||
##### Growing the Profession
|
||||
|
||||
Of all the professions in risk management,
|
||||
that of the actuary is the only one
|
||||
that is actually a legally recognized profession.
|
||||
Becoming an actuary requires a demonstration of proficiency
|
||||
through several standardized tests.
|
||||
It also means adopting a code of professional ethics
|
||||
enforced by some licensing body.
|
||||
When actuaries sign their name
|
||||
to the Statement of Actuarial Opinion of an insurance company,
|
||||
they put their license on the line.
|
||||
As with doctors and lawyers,
|
||||
if they lose their license, they cannot just get another job next door.
|
||||
The industry of modelers of uncertainties outside of insurance
|
||||
could benefit greatly from this level of professional standards.
|
||||
|
||||
Standards organizations,
|
||||
government affiliated and otherwise,
|
||||
have always been a key part of what makes a profession a profession.
|
||||
But standards organizations such as PMI, NIST, and others
|
||||
are all guilty of explicitly promoting
|
||||
the ineffectual methods previously debunked.
|
||||
The scoring methods developed by these institutions
|
||||
should be disposed of altogether.
|
||||
These organizations should stay out of the business
|
||||
of designing risk analysis methods
|
||||
until they begin to involve people with quantitative decision analysis backgrounds
|
||||
in their standards-development process.
|
||||
Professionals should take charge of the direction their profession evolves
|
||||
by insisting the standards move in this direction.
|
||||
|
||||
#### Practical Observations From Trustmark
|
||||
|
||||
#### Final Thoughts On Quantitative Models And Better Decisions
|
||||
|
||||
#### Notes
|
||||
|
||||
## Appendix: Additional Calibration Tests And Answers
|
||||
Reference in New Issue
Block a user