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Tidy summary of October 2009 HBR article.
Nassim N. Taleb, Daniel G. Goldstein, and Mark W. Spitznagel discuss risk management and short comings in approaches in the October 2009 issue of the Harvard Business Review (subscription required).
They offer up six mistakes in the way we think about risk:
1. We think we can manage risk by predicting extreme events.
2. We are convinced that studying the past will help us manage risk.
3. We don’t listen to advice about what we shouldn’t do.
4. We assume that risk can be measured by standard deviation.
5. We don’t appreciate that what’s mathematically equivalent isn’t psychologically so.
6. We are taught that efficiency and maximizing shareholder value don’t tolerate redundancy.