Customer Reviews:
Showing reviews 26-30 of 32
 An Important Addition To A Risk Manager's Library May 6, 2009
Rich Johnson (Bay Area, CA)
27 out of 28 found this review helpful
How do we know if our risk management methods are working? Would we notice if they were not working? What are the consequences if they are not working? These are the three basic questions that Douglas Hubbard asks in his book The Failure of Risk Management.
In this book Mr. Hubbard lays out the basics of risk management and explains why many risk management methods are worse than useless. He also provides some ideas and first steps to fix the problem.
Here's a brief walk though 'The Failure of Risk Management':
Part I introduces the history of risk management and the problems with modern risk management methods. Independent events, for instance, are often times not independent at all. This common-mode failure is unaccounted for by many managers, yet can be devastating in an emergency.
Part II of the book goes in depth with some of the problems and failures of risk management, and to me was the most interesting part of the book. Chapter 4 is called The "Four Horseman" of Risk Management, and describes the differences between what the author considers the four main classes of risk managers. The four classes are actuaries, "war quants," economists, and management consultants. Each group has distinctly different methods and areas of expertise, as well as different levels of validation.
Chapter 5 is about how risk should be defined, and why different people may actually be talking about different things when they discuss volatility and risk. Chapter 6 breaks down why humans are not good at subjective methods (which lays the ground work for later chapters introducing quantitative methods). There are a few "calibration" tests available for you to see how overconfident you are in your decision making. These are pretty interesting, and even after reading about overconfidence I still did poorly on them.
Chapters 7, 8, and 9 talk about problems with subjective scoring methods, problems with describing one-off events, and the problems with some quantitative models. The author talks about "black swans," as described by Nassim Nicholas Taleb, and how they relate to modeling. Many times people believe that events can't be modeled, but the author believes this is not so.
The last section of the book, Part III, gives some ideas on how to fix risk management. Adding empiricism is a big start, as well as calibration of subjective human inputs. Many companies build and use models, but then they don't actually bother to see how well the things have performed in the past. I will leave the rest of the solutions for you to read in the book.
Recommendation:
First off, the author says this book is geared towards all types of risk management, and all types of industries, and I think this is true. The author uses a wide variety of examples from airplane engine failures to volcano eruptions. But I still feel like this book is more geared towards enterprise risk management, and less towards the already quant heavy fields such as actuarial science or credit risk management. But it was an interesting read nonetheless.
It seems like in the past 20 years there have been several so-called "once-in-a-lifetime events," such as the floods of Hurricane Katrina or any of the financial crisis, including 1987, 1998, 2000, or 2008. I wish I had the money to buy this book for every person who ever said "no one saw that coming."
I think this is a great book for anyone who deals with the potential for risk, loss, or damage - no matter if it is financial, personal, or physical. When the stakes are high we should be careful relying on a risk matrix developed by a management consultant, and Douglas Hubbard will tell you why. If you work in risk management, or if you have influence on the operational strategy of some organization, then this book is a must read.
Could be better, but still exceptional April 29, 2009
Oleg Tumarkin (Menomonee Falls, WI)
3 out of 5 found this review helpful
Chapters 9-12 make this book be the champ that I would have expected from Hubbard. These chapters, along with the website link, really explain how to break down risks and analyse them. If you read his first book, skip right to chapter 9, if not buy his other book, read it and then skip to chapter 9. Everything in first 8 chapters is but a loooong precursor to the meat, but the meat is great. My more detailed review is listed on e-m8.org (http://www.e-m8.org/2009/04/book-review-the-failure-of-risk-management-by-doug-hubbard/)
I love this book! April 23, 2009
Deanna Lovett (Yale, SD)
1 out of 5 found this review helpful
I am about half way through it and I love it! Mr. Hubbard has written an instant best seller!
Sure to be the risk management book of the year April 19, 2009
David R. Koleson (St. Louis, MO)
1 out of 2 found this review helpful
This book shatters what heretofore has been the foundation for modern risk-management. The current state of the world economy is a testament to that foundation's inherent instability. The book is logically arranged into 3 sections as the title suggests: an introduction to the failure of risk-management, why it has failed, and how to fix it.
Hubbard's system, he's been it using for years, clearly debunks the "myths" that executive-level administrators use to base their decisions about risk. This book contains pertinent information for the common tax-payer as well as corporate executives.
Hubbard's observations and methodology should be implemented as soon as high school business classes and on through to post-graduate studies. Years of accepted practice must be "unlearned" in lieu of Hubbard's accurate and proven style of risk-management.
The public has unknowingly needed to experience Hubbard's revelations for years. Anyone who spends money assesses risk. Therefore, this book applies to all.
Sure to be the risk management book of the year April 19, 2009
David R. Koleson (St. Louis, MO)
1 out of 3 found this review helpful
This book shatters what heretofore has been the foundation for modern risk-management. The current state of the world economy is a testament to that foundation's inherent instability. The book is logically arranged into 3 sections as the title suggests: an introduction to the failure of risk-management, why it has failed, and how to fix it.
Hubbard's system, he's been it using for years, clearly debunks the "myths" that executive-level administrators use to base their decisions about risk. This book contains pertinent information for the common tax-payer as well as corporate executives.
Hubbard's observations and methodology should be implemented as soon as high school business classes and on through to post-graduate studies. Years of accepted practice must be "unlearned" in lieu of Hubbard's accurate and proven style of risk-management.
Management has needed to know this kind of information for years and Hubbard has finally put it in a well-written book. Anyone who spends money assesses risk. Therefore, this book applies to all.
Showing reviews 26-30 of 32
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