6.2 KiB
id, aliases, title, tags, authors, publisher, type, year
| id | aliases | title | tags | authors | publisher | type | year | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| The Failure of Risk Management: Why It's Broken and How to Fix It, Second Edition |
|
Douglas W. Hubbard | John Wiley & Sons, Inc. | book | 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.