• Very thoughtful post Jerome and your other points about the shape of risk is too often ignored or not understood in the risk community.  Keep up the great discussion and look forward to hearing more for each of you.

  • I want to congratulate James Bone on his insightful post.  I agree 100% with the addition of a sprinkling of experience.  By “experience” here, I mean the exercise of getting ones hands dirty by having tried several of the methods mentioned and understanding their strengths and weaknesses.

     I also want to thank him for the post of “risk-has-shape”, which is the most important (ONLY) thing for me.  The reason I say “thank” is because this poses two very relevant questions that I have worked on for decades and needs much more emphasis in educational training:

    1) What is the shape; and

    2) How to change the shape.

    For the first, the methods considered in education are usually rudimentary.  The second is even less considered.  I say less because it is usually assumed that risk is one-dimensional and that shaping usually means squishing the density function.  It does not (example: reinsurance portfolios and others).  An additional complication is that risk is multi-dimensional.  You need to consider how to change the shape of multi-dimensional risks.

    One last point on shape that I believe education usually misses.  There is excessive emphasis on getting the shape “right”.  You will not achieve this if right means true.  What then is lost is that the most important target is to get a “good solution”.  It then is the idea of a “good solution” that requires bringing in the additional skills that James Bone so accurately elucidates.

    Well said and I agree. I should have qualified my response!

    I do not like the word "training". We train animals (and athletes!).  I prefer skills development and knowledge transfer.

  • Experience does help but what if it is the wrong experience.  Experience alone is part of the problem.  Athletes with experience don't always develop into good players.  That is why only 5% of the best athletes become professional.

    Bad experience, like bad data, equals bad outcomes.  We must move beyond "experiential training and learning" to expert training.  Do you want a surgeon with poor outcomes simply because he/she has experience?

  • Other posters have described the basic essential skills required. But nothing will ever replace a wide experience. 


  • Well said Frederick!  For those who are concerned about becoming quantitative risk managers there is a large database of GRC tools available and access is free!

    Microsoft Excel also has a variety of tools available if are willing to take the time to learn them.  This is the future direction of risk so now is a good time to begin your research and education on the analytics of risk management.

    Good luck all!

  • I agree with James Bone:  risk managers need to understand quantification and the mathematics of uncertainty; but most seem content with identification and vague, ordinal scales for exposure, velocity and potential cost.  As a result, risk managers are unable to produce an intelligible analysis of their organization's risks for executive management.  Checklists and SOPs are not a substitute for measurement and critical thinking.

  • The best education is the one that most risk managers do not receive.  Mathematics, statistics, probability, physics, and the full body of research from economics on making decisions under uncertainty.  Frank Knight, Herbert Simon, Dan Kahneman and many others are not known by risk professionals.

    Risk pros are not even aware that risk, unlike audit and compliance, has its pedigree from the halls of Nobel Laureates.  Risk is a derivative of philosophy, psychology, economics and mathematics.


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