All Life Is Problem Solving

Joe Firestone’s Blog on Knowledge and Knowledge Management

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Riskonomics: Reducing Risk by Killing Your Worst Ideas — A New Book

February 7th, 2016 · No Comments

About 6 years ago I stopped posting at my All Life Is Problem Solving site, and shifted my blogging over to other sites devoted to economics and politics, often blogging under the handle letsgetitdone. But recently, I got the urge to finish some work I’d done in Knowledge Management, and I decided to complete a book presenting a Knowledge Management approach to the analysis and assessment of risk.

I’ve just done that and have published a kindle e-book with the above title, which of course, was my signal that I ought to be blogging here again. The following excerpt provides the book’s preface summarizing its rationale and contents. If you read this and are interested, you can buy it at Amazon, and, if you have not already done so, download the free kindle software that will allow you to read it. Here’s the preface.

Cover of Riskonomics

Risk is something we live with everyday. It is part of our being alive. Every living thing has expectations. And when it acts on those expectations, it risks error, because nothing living is infallible. Any one of our expectations may be wrong at any time. None of us is so wise, or so favored, or so skilled, or so wealthy, or so lucky, that we can avoid error and the risk of it.

The survivors of the great Asian Tsunami of 2004 know that even an infinitesimal risk, the risk of merely being in the affected areas, can be made manifest in unimagined reality. The families of those who died in the 9/11 attack have the same kind of knowledge of risk made manifest. Who among them, that fine sunny morning, had even an inkling of the risk their loved ones were taking, merely by going to work in the towering global center of commerce that was the World Trade Center?

The top executives of Enron, Lucent, Arthur Andersen, Lehman Brothers, and Bear Stearns realized, to their lasting regret, that they risked, and suffered, consequences they never imagined were a real possibility at the time they made the various decisions that destroyed or severely damaged their companies. The “Neo-Cons”, both in the Bush administration and outside it, urged the US intervention in Iraq, and provided estimates of its likely costs initially ranging from zero to $1.7 Billion in testimony to Congress. At this writing, estimated costs are over $2 Trillion, and are projected to rise to $4 Trillion, and there is no end in sight of either of these rising costs, Iraqi or Alliance casualties, or the growth of anti-Americanism and terrorist recruitment in the Muslim world resulting from the intervention.

Recent history, prior to the crash of 2008 is all about people taking risks they did not know they were taking, and losing out, indeed losing big. In business, risk assessment and risk management are more important than they have ever been. Now the world economy hangs in the balance as the financial sector continues to engage in risky behavior after legislatures in nation after nation failed to enact legislation sufficient to remove the derivatives market and other risky practices from the financial landscape.

In business, all eyes are focused on risk, and that is why a brief, conversational, overview on risk and how to reduce it, such as this one, is needed so badly right now. There are a lot of technical books in the market on risk and risk management emphasizing formal and financial approaches to risk, but I don’t know of any works that focus on the risk of error in decision models in conversational language that people will be able to both read quickly and easily assimilate. This is a short book, roughly 30,000 words, and it is quick and inexpensive reading for the trade market of books on business and other forms of organization.

So:

— How can decision makers reduce risk?

— How can they recognize when they have problems of unanticipated risks in their decision models?

— How can they tell whether they’ve accurately assessed risk and whether decisions they are thinking about have high risks?

— How can they prioritize risks?

— How can they create processes and systems that will help them to reduce risks?

— How can they assess the ability of their organizations relative to their competition to solve problems in alternative areas of risk they are considering entering?

Why is reducing the risk of error by killing your worst ideas a hard thing to do?

The goal of Riskonomics: Reducing Risk by Killing Your Worst Ideas is to answer these questions in a way that can be easily understood and acted upon. It tells people how to reduce risk, particularly in business, by using both creative learning and critical thinking. But its general ideas can be applied to risk in organizations of all kinds, and to risk in individual decisions, as well.

Riskonomics: Reducing Risk by Killing Your Worst Ideas is for everyone who makes decisions and works in an organization of any sort. For the general reader: the book:

— is essential reading they cannot afford to overlook, in a world where our largest companies may be destroyed or brought low, our most prestigious governments robbed of legitimacy, and top executives made vulnerable to prosecution, by risky decision making;

— tells how a large organization, can learn how to reduce risk in its decision making by taking the approach of surfacing problems, creating new decision models, and killing its worst ideas through critical exchange;

— provides, in a brief book, both a new approach and practical advice for all in Business, Government, Non-profit, Non-Governmental, and Supranational organizations about how to reduce risk in decision making;

— provides a general approach to reducing risk that can also be used in everyday life and is not restricted to organizations, alone; and finally:

— the book is good for long plane rides and rail trips because it is short and its style is conversational, though intermixed with both philosophical and technical discourse.

The book is also of special relevance for the following groups of people:

— Board Members and Legislators (interested in mitigating the risk of both Management’s and their own errors, including those leading to malfeasance and corruption)

— Chief Executive Officers, Chief Operating Officers, Top Governmental, Non-profit, Supranational, and Non-Governmental Executives (interested in mitigating the risk of error in formulating and implementing strategies and compliance policies)

— Organizational development practitioners (interested in mitigating the risk of error in strategies and programs for improving organizational performance)

— Human Resource Executives (interested in mitigating risks of error in recruiting and learning strategies)

— Chief Information Officers, Chief Knowledge Officers, and Information Management and Technology Executives (interested in reducing the risks of error in information and knowledge strategies and in implementing Information Technology support for information and knowledge processing and for decision making.)

— Research Directors and Chief Strategists (interested in reducing the substantial risk of error involved in strategies, anticipating the future, developing new product and service strategies etc.)

— Treasurers, Controllers, and Chief Financial Officers (interested in reducing risks in decision models used in handling financial resources, investments, mergers and acquisitions, and in compliance processes)

— General Counsels (General Counsels now have to mitigate risks of error in compliance models and decision models used in public filings)

— Operations Managers and Procurement Officers (Operations Management and Procurement activities in large organizations are often mission critical and fraught with risk. Managers in these categories have a special interest in reducing the risk of error in their decision models)

— Marketing Managers (the risk of error in previous marketing decision models increases when companies enter new markets, using new technologies, and new products.)

— Sales Managers (interested in mitigating risks of error in sales strategies, sales compensation policies, and sales automation)

— Operational Personnel involved in High Risk Decision Making (Professionals such as Accountants, Doctors, Lawyers, Engineers, and Consultants are interested in reducing the risk of critical errors, such as errors in drug prescriptions, accounting, and legal strategies).

Tags: Knowledge Making · Knowledge Management