Customer Reviews:
Showing reviews 6-10 of 32
 Most importantly, how to fix it September 24, 2009
R. Hobbes PhD (St. Louis)
4 out of 5 found this review helpful
This is a fascinating review of major problems with risk management and how to fix them. The author points out that unlike many other thing, the effectiveness of risk management is not immediately apparent and may never be evaluated at all. This allows for half-baked methods to be adopted for indefinite periods and causes great losses. Hubbard proposes that risk management methods can at least be "component tested" so that we can confirm that the parts work. He points out that a lot of this research has been done and does not paint a flattering portrait for existing methods.
His proposed methods, instead, are based on procedures that have be tested in controlled experiments for long periods and show a measurable improvement in decisions.
I was turned on to this author after reading The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty by Sam Savage - another great assessment of common flaws in decision analysis and risk management.
Best read I've had on the topic September 9, 2009
Merriam W.
5 out of 5 found this review helpful
Hubbard sets out with a big goal and meets it. He gives the most complete explanation of how certain flaws evolved in risk management. While Hubbard's historical analysis is not as detailed as Against the Gods: The Remarkable Story of Risk, the Failure of Risk Management is much more in depth about the details of the flaws about models use for all aspects of risk management. The next time someone is pushing a new, unproven, risk management method down our throats in our organization, this is the book I'll push back with. Show me the evidence it works, or don't waste my time. Bravo.
Risky thinking August 29, 2009
Steven A. Peterson (Hershey, PA (Born in Kewanee, IL))
10 out of 12 found this review helpful
This is a very handy work on risk management. Douglas Hubbard, the author, takes the "field" of risk management to task for many practitioners simply not having a clue and doing a disservice to their organizations. He emphasizes quantification and abhors the "soft" risk management practices that are all-too-common. His introductory lament sets the book's tone (Page xi): "Unfortunately, risk management based on actual measurements of risks is not the predominant approach in most industries." More directly (Page xii): ". . .much of what has been done in risk management, when measured objectively, has added no value to the issue of managing risk. It may actually have made things worse."
Parts I and II lay out the nature of the "crisis" and why this sad state of affairs has occurred. Part I notes that many weak methods have been adopted, not providing much assistance to organizations. In Part II, he notes the four major approaches to risk management (what he terms the "Four Horsemen)": (a) actuaries focus is on assessing and managing risk in insurance and pensions); (b) War Quants (use probabilistic risk analysis, decision, analysis, and operations research); (c) economists management of risk in portfolios); (d) management consultants (tendency to be more intuitive, relying on individual experience--an approach he likens to "snake oil" (page 71). His preference is the use of quantitative approaches and an understanding of uncertainty and probability. In the process, he emphasizes the work of those scholars following in the footsteps of psychologists Amos Tversky and Daniel Kahneman (whose works I have reviewed elsewhere), who point out the inherent biases in "intuitive" approaches. In the process, he takes some well deserved shots at the approach of Nassim Nicholas Taleb, well known for his work "The Black Swan."
Part III addresses "Howe to fix it." Here, Hubbard goes through approaches and techniques that he views as legitimate and actually contributing to risk management. In a generally readable analysis, he indicates to readers how risk management ought to be carried out.
All in all, a useful volume. I appreciate the critique of the "soft" approaches to risk management. For those involved in security and risk analysis, this would be a useful volume.
 Book never delivered August 26, 2009
My Cameron Hay (Australia)
1 out of 19 found this review helpful
I would love to review this book, which I ordered from Amazon 4 months ago, but it was never delivered. And while Amazon helpfully allows me to track shipments, should they not arrive Amazon provide no way to inform them. So I am out of pocket, with no way except this stupid review to communicate the fact to Amazon.
Next time, I will purchase from elsewhere.
Great tool for "hard" and "soft" risk analysis August 22, 2009
Phineas J. Whoopee (Boston MA)
8 out of 9 found this review helpful
Some risk analysis methods work. Some don't. Hubbard explains how to tell the difference. The good news is that for every "placebo" method that gives only comfort but not real benefits, there is one that really does work. The bad news is that the most effective methods are the least widely used and the least effective methods are the most widely used.
I like the survey he includes about Monte Carlos. He makes a solid case that, without training, most experts will be statistically overconfident when assessing subjective odds. But since most Monte Carlo models have at least some subjective estimates, this means that most will understate risk. I haven't heard anyone point out that problem much less a way to fix it.
Correcting problems with Monte Carlo models is important because, once these issues are addressed, it is one of the most powerful tools available to the Chief Risk Officer. Hubbard provides several free spreadsheet downloads on his book's companion website that help the reader understand what might be complex calculatins.
This book is the best risk management investment I've made.
Showing reviews 6-10 of 32
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