Shared by JohnH

Nice recap of the HBR (paywall) article. From the Globe and Mail… Single comment is negative, uninformed and offensive.

With risk management under fire after the recent economic meltdown its adherents failed to prepare for, corporations are reassessing how to protect themselves in the days ahead. In Harvard Business Review, Nassim Taleb, author of the best seller The Black Swan: The Impact Of the Highly Improbable, and University of London’s Daniel Goldstein and Universa Investments’ Mark Spritznagel outline six mistakes that executives make in risk management:

TRYING TO PREDICT EXTREME EVENTS

We are inept at trying to predict unlikely events – the so-called “black swans” that Mr. Taleb highlighted – such as periodic financial crises or the Sept. 11, 2001, terrorist attacks. By focusing attention on extreme scenarios, we neglect more likely possibilities, leaving us vulnerable.

Instead, companies should concentrate on the consequences of extreme events, as nuclear plants have done by shifting from trying to predict when an accident might occur to preparing for such a crisis. If a small but unexpected fall in demand could set your company reeling, rather than trying to predict the likelihood or when it might occur, pay attention instead to how it could withstand the impact.