Riskczar Haiku #1

 

This is Riskczar’s first risk management-related haikus.

Riskczar Haiku #1

A referendum?

You really want debt default

George Papandreou?

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Rant about mobile phones and E. coli

The book Fast Food Nation was one of my favourites when I read it years ago specifically the chapter about the risks of E. coli and the meat packing industry. One of the most memorable quotes I know came from this book: “There is shit in the meat”.

Well I guess now we can say there’s shit on your mobile phone too. Gross.

It was reported this week that “90% of mobile phones are “coated with some kind of bacteria, including E.coli.” and “although 95 per cent of participants claimed to wash their hands with soap whenever they could, some 16 per cent of hands and phones contained E.coli.” Ewww.

This comes as no surprise to me as I’ve already written about witnessing grown men not washing their hands properly after doing their business. Despite the signs from public health posted in many washrooms, men I’ve seen still believe wetting your fingers under water for 3 seconds is proper washing technique. Men: you’re going to go home and touch your children later with your pee fingers and you’re all rubbing mobile phones with your poop bacteria all over your cheeks.

Why not just lick the toilet handle as it’s probably cleaner.  Manage your risk people. Wash your hands properly please.

Footnote: It wasn’t that long ago that one could regularly hear our neighbours in the bathroom stalls scrolling through their emails on their BlackBerry devices. Now that the devices have track pads and touch screens, I am sure they are still doing this, only it’s done silently.

 

http://riskczar.com/2011/10/19/rant-about-mobile-phones-and-e-coli/

 

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Risk management oldies but goodies

The good folks at Riskviews got me thinking about my least read posts. I’ve been doing this for a few years and understand that no one wants to scroll through over 300 blog entries to find some gems from 2006. So here are a few items you may have missed that might be worth your time.

A Common Sense Approach to ERM

In a sentence, The Riskczar says the common sense approach to describing the process of risk management like this: First you identify your risks, you figure out which ones are the most important, next you decide how to address and then you do something about it and tell everyone how you are doing from time to time.

Simple.

Fantasy football pool risk management

Risk Management Monitor addresses the concern about employees spending hours of company time researching and updating their fantasy football picks. Some argue that it’s disruptive – having fired employees or blocked access to certain websites from the company network – while others suggest it boosts morale.

Riskczar believes that fantasy football is merely another workplace distraction. If people were not spending their workday on sports betting, they might be wasting time on Facebook or Twitter. And in places where those sites are banned, your employees may be reading the online version of the Wall Street Journal, shopping on Amazon or searching for a new job on Monster. If we transport ourselves back to 1990 before the Internets, people used to hang out by the water cooler talking about football or the latest episodes Cheers and the Cosby Show. Unengaged employees have always found a way to slack off. Technology didn’t create that.

And what goes for the workplace often goes for the classroom. When I returned to school in 2001, only a couple of people had wireless Internet access from their laptops. One professor was upset that the surfing was going on and wanted to turn off the connection. Here’s my take: before wifi, people brought laptops to class and played Solitaire and before that people passed notes around or doodled on their hands. Today they probably play on their iPhones or BlackBerry devices. Unengaged students will always find a way to pass the time. Technology didn’t create that.

But in the end does it really matter what your employees are doing with their time so long as all of their work is getting done on time?

The CRO cannot be expected to do what only the CEO can do

Here’s an excellent op-ed piece in US Banker about the role of the chief risk officer and the CEO. This may be the best thing I’ve read in months.

Setting the tone for this article is Warren Buffet who recently wrote in the BRK shareholder’s letter: “I believe that a CEO must not delegate risk control. It’s simply too important. … If Berkshire ever gets in trouble, it will be my fault. It will not be because of misjudgments made by a risk committee or chief risk officer.”

The author writes:
1)  CEO is directly responsible for thoroughly understanding and signing off on all significant risks embedded in the bank’s business strategy
2)  CEO is directly responsible for protecting the bank’s franchise against excessive or inappropriate risks that could derail the business strategy or damage the bank’s reputation and access to capital.
3)  CEO is directly responsible for creating a strong risk culture across the entire bank

Read this article then read it again. Print it out and nail it to the front door of your bank too.

What can Grover teach us about risk management?

In a book called Project Manager’s Spotlight on Risk Management by Kim Heldman, the author references The Monster at the End of This Book by Jon Stone and Michael Smollin to demonstrate the importance of having a risk response plan for dealing with monsters and threats in projects.

I took this allegory a step further and actually read this book to a room full of adults during my presentations on risk management basics.

In the book, Grover is concerned with the monster he is going to find at the end of this book. To mitigate this threat, Grover spends thousands of dollars on costly building supplies to prevent us from turning pages, so that we do not get to the end of the book.

As a risk management professional, I appreciate Grover’s proactive risk management approach, but unfortunately, our blue, furry little friend overreacts to the threat.

If he had only performed a proper risk assessment, rather than basing it on anecdotal evidence – he learns about the monster by reading the title page only – Grover may have realized that the monster did not have the catastrophic impact he expected it to have. It turns out the risk was not even material.

With more due diligence, Grover may have chosen a different risk treatment: he could have accepted the risk by doing nothing or transferred it to someone more naïve like Elmo.

This book is a great primer on risk management and one that your three-year old might also enjoy.

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Steve Jobs and my earliest Apple memories

Since the world is singing the praises of the late Steve Jobs, I thought I would share my earliest Apple memories.

It was probably 1981. I was in the sixth grade when my friend first mentioned his Apple computer. I had no idea what a computer actually was nor what it did or looked like. When he described this “computer” I visualized an arcade game like Pac-Man where you stood while you used it. It wasn’t until the following year when I saw my first Apple computer at school. We played with Logo and drew pictures by typing code and I still have no idea what was the benefit. It was around that time that we bought one at home.

I believe that Apple ][e cost $2400. I remember splitting the cost three ways between my brother, my parents and I. We had some bar mitzvah cash we were looking to spend.

My Apple ][e introduced me to programming. It was always fun when I walked past one on display in a department store and typed the following code then walked away. Sometimes I typed bad words too.

10 PRINT “TREVOR IS THE GREATEST”
20 GOTO 10
END

RUN

TREVOR IS THE GREATEST

TREVOR IS THE GREATEST

TREVOR IS THE GREATEST

TREVOR IS THE GREATEST

TREVOR IS THE GREATEST

My Apple ][e was fun for its walkthrough games like Kabul Spy and action games like Lode Runner or Karetaka (I recommend you watch the Karateka video. It’s good times).

Incidentally, I also remember when Apple introduced the Lisa. I like a girl named Lisa in 1983 so it was funny.

By 1990, I was in university and Apple’s Bank Street Writer word processor wasn’t cutting it. I despised all those MSDOS back-slashes so the new Mac Classic which was about half the price of the previous Macs was a no brainer for me. I believe I paid $1600 for that one. I pulled it out of storage last year just to show it to my son, now 13. It was fun showing him that old Mac.

It didn’t know Steve Jobs but he was responsible for making some neat stuff and some pretty nice memories. My son has an iPod Touch now but I doubt it will give him the same great memories that I had with my first Apple product.

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There’s risk in relying on risk managers

Andrew Hill from the Financial Times writes there’s risk in relying on risk managers. He also notes that despite Carsten Kengeter’s assertion: “We will not rest until we have controls that are as watertight as possible”, we all know that organizations cannot function without taking any risk.

Banks and investment banks are in the business of making money so good luck with that whole resting thing.

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Risk management is neither the cause nor the solution to UBS’s problems

A headline today on CBC.ca reads “UBS case latest failure of risk management”.

I think I will spend the rest of the day being offended by the CBC. (All will be forgiven if Amanda Lang appears on the National tonight.)

Despite all the systems, oversight, controls, compliance, supervision and some other sixth thing, you can’t stop the rogue trader. Adoboli is to blame. His boss is to blame. Maybe culture or performance objectives are to blame. But risk management is not.

Saying Risk Management is to blame is like saying the police department should be blamed for a teen committing a murder: the police do their best to increase patrols in high crime neighborhoods, to take weapons off the streets, to educate teens; but police cannot stop stupid people from doing dangerous things once in while. Point the fingers at parents before the police.

Risk management is neither the cause nor the solution to a bank’s problems.

UPDATE: This post was written before it was revealed Mr Adoboli was alleged to have “accrued the record loss by carrying out a large number of transactions over the course of the three-year period, rather than through a single deal that went wrong. ” It was assumed at the time I wrote this post that the crime took place over the last few days/weeks.

 

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Bad day to be chief risk officer at UBS

Blessed are the risk managers: for they shall be called sons of God.

                                                                                          –  Riskczar 5:9

One can only imagine the profanity and f-words that spewed from the mouth of Maureen Miskovic, the new Chief Risk Officer at UBS, when she learned about the $2 billion rogue trading hit at UBS. I bet she made Carol Bartz look like a Ned Flanders.

It’s still too soon to know who knew what and when, but as Simon Morris explained in a Reuters article, the root cause is likely insufficient supervision:

“No rogue trader works in a vacuum, and UBS’s management must have taken its eye off the ball to allow a trader to operate on this scale without sufficient supervision and without the systems to monitor his trades”

I am sympathetic to risk managers who often make convenient scapegoats when there are likely a half-dozen people including the rogue trader’s boss, boss’s boss and boss’s boss’s boss who are more accountable than the Chief Risk Officer.

There is rarely any upside in being the head of risk management but lots of downside. I will follow Ms. Miskovic’s story with great interest.

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Reading the fine print risk management

Terms and conditions. Terms of use. Cardholder agreement. Just like Satan, the fine print has many names.

The Guardian reported in May 2011 that only “7% of people actually read the full terms when buying a product or service online, while a fifth say they have suffered from not doing so.” The article describes how many of us get locked into longer contracts that we didn’t want or unwanted items. We don’t know our rights.

We all do it (well, actually 93% of us do it) whether we are installing software on a pc or an app on a BlackBerry, we just scroll the bottom and push “Accept” without reading what we are agreeing to. Occasionally my credit card company will send me a tiny booklet with the new rules about using my card which goes from envelope to hand to the recycling box. For all I know I have agreed to sell my first born or to join the Republican Party.

(Like risk management) we all know it’s important but apparently only 7% of us really take this seriously. Nobody cares what that fine print says; we just want to accept and install and start playing Warcraft. Well nobody cares except the 7% of the population which went to law school.

Each of us is probably at risk of being fined or sued in hundreds of different ways by hundreds of different vendors right now.  Just think about how many agreements we sign (credit cards, bank cards, rewards cards) or how many times we do a Google search for photos and put it on our Facebook profiles or on our blogs? Who can keep track of all those terms and conditions? Who knows the all of the rules?

While I sit here writing this, I have just received an email with the subject line: “Important update about your Kodak Gallery account”. I didn’t even remember having one. I don’t know the terms of that use.

As I was saying it may sound ridiculous but despite your belief that use of a photo (while including the source or the owner) is benign, have you just violated the terms and conditions of Google, Facebook or the rightful owner of the picture? It seems that photo or document belongs to someone and despite seemingly harmless use, nothing is stopping them from coming after you to take their “pound of flesh”. (Phrase courtesy of the Merchant of Venice, William Shakespeare, 1596. Don’t sue me.)

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Broken links

Hello readers. I would like to apologize for any broken links you may be experiencing on the site. I’ve removed many of the links to documents and photos that appeared on Riskczar.com to mitigate any litigation risk. Seriously.

Trevor

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Voldemort vs Taleb Deathmatch

With all the hype surrounding the final Harry Potter movie, I thought I would compare Voldemort to Nassim Taleb, financial guru and author of the book “The Black Swan”, to see who is greater. (Plus I thought it might be funny.)

(Removed a really good photo of Voldemort and Taleb)

Place of Birth 

• Taleb: Amioun, Lebanon (winner)
• Voldemort: Little Hangleton, England

Middle Name 

• Taleb: Nicholas
• Voldemort: Marvolo (winner)

Father 

• Taleb: Doctor (winner)
• Voldemort: Muggle

Languages      

• Taleb: English, French, Arabic Italian, Spanish, Greek, Latin, Aramaic, Hebrew, Canaanite (winner)
• Voldemort: English and Parseltongue

Academics

• Taleb: University of Paris and University of Pennsylvania (winner)
• Voldemort: Hogwarts School of  Witchcraft and Wizardry

Objective

• Taleb: Safeguard investors against crises while reaping rewards from rare events
• Voldemort: Rid the Wizarding world of Muggle heritage and conquering both worlds (winner)

Described As

• Taleb: “The hottest thinker in the world”
• Voldemort: “The most evil wizard for hundreds and hundreds of years” (winner)

Considers Himself     

• Taleb: Epistemologist of randomness
• Voldemort: Greatest Legilimens in the world and a highly accomplished Occlumens (winner)

 Nickname

• Taleb: Dark Lord
• Voldemort: Dark Lord (draw)

Professional Accomplishment

• Taleb: Pioneer of tail risk hedging or black swan protection (winner)
• Voldemort: Apparate silently

 Health Accomplishment

• Taleb: Overcame throat cancer
• Voldemort: Regained his body and was restored to his full power (draw)

What he would see in the Mirror of Erised

• Taleb: He would see “Himself, all-powerful and eternal.”
• Voldemort: He would see “Himself, all-powerful and eternal.” (draw)

 His Boggart

• Taleb: Myron Scholes (winner)
• Voldemort: His own corpse

With a final score of 6-4, Taleb wins over Voldemort. All hail the Dark Lord.

Sources:

http://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb

http://en.wikipedia.org/wiki/Voldemort

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