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Risk Management is a game without end

May 18th, 2011 admin

March 16th, 2010

Three actuaries and three accountants are traveling by train to visit a ‘Risk Management Conference’. At the station, the three accountants each buy tickets and watch as the three actuaries buy only a single ticket.

“This looks very risky. How are three people going to travel on only one ticket?”, one of the accountants asks.

“Watch and you’ll see! Take notice of our brand new risk management approach”, one of the actuaries answers.

They all board the train. The accountants take their respective first class seats, but all three actuaries cram into a restroom and close the door behind them.
Shortly after the train has departed, the conductor comes around collecting tickets. He knocks on the restroom door and says, “Ticket, please.” The door opens just a crack and a single arm emerges with a ticket in hand. The conductor takes it and moves on.

The accountants were deeply impressed by the actuarial approach and agreed it was – after all – quite a clever idea without any substantial risk.

So, completely confident and with even more Risk Management skills gained at the inspiring Conference, the accountants decide to copy the actuaries new risk approach on the return trip and save some money (accountants have always been clever with money!). When they get to the station they buy a single ticket for the return trip.

To their astonishment, this time the actuaries don’t buy a ticket at all. “This is reckless, how are you going to travel without a single ticket?”, one of the perplexed accountants asked. “Watch and you’ll see! Take full notice of our latest risk management approach” answered an actuary.

When they board the train the three accountants cram into a restroom and the three actuaries cram into another one nearby. The train departs.

Shortly afterward, one of the actuaries leaves his restroom and walks over to the restroom where the accountants are hiding. He knocks on the door and says, “Ticket, please.”

Conclusion:

What conclusions can we draw from this simple story?

Risk Management is a game without end

The effect of Risk Management Conferences is threefold:

Some attendants get smarter
Others get overconfident
Final result: Increasing Risk, instead of decreasing Risk

There’s an old Dutch saying that expresses the danger of increased Risk Management :

“A warned man counts for two”

If we want to reap the fruits of Risk Management, accountants and actuaries have to start working together, instead of struggling and competing each other.

Risk Manager Profile and qualifications
Insight, creativity and integrity are important requirements to become a professional Risk Manager. Unfortunately, this is not enough.

To tackle Risk Management in a company, you need the best potential crook around. One who’s willing to settle his salary and earnings for a little less than he would have earned as a real crook, in return for having a respectable job and not risking to end up in jail. You could call it the Personal Risk management of the Risk manager. Employers that settle for an inferior Risk Manager, know one thing for sure: someday somebody more ‘crooky’ than ‘your risk manager’ will tear your company down!

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