Category Archives: Risk Management

Unsuitable Risk

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Earlier this week, famed chairman George Zimmer was relieved of his duties at Men’s Wearhouse.

According to a story in Bloomberg BusinessWeek, Zimmer’s quest to turn Men’s Wearhouse from a public entity to a private one was met with heavy resistance from his board. It wasn’t the suggestion that led to his termination but rather his persistence on the matter combined with his inability to acquiesce power to a newly appointed management team.

Did Zimmer and Men’s Wearhouse fail to utilize their risk management arm for a proper risk assessment to determine the advantages and disadvantages of the move? Could the clothing giant have missed an opportunity to leverage a risk (risk of going private) and instead hastily choosing to implement a mitigation strategy that included handing the move’s champion his walking papers?

According to a letter released by Zimmer yesterday, they did. In it he says:

“Rather than thoughtfully evaluating the idea or even checking the market to see what value might be created through such strategic alternatives, the Board quickly and without the assistance of financial advisors simply rejected the idea, refused to even discuss the topic or permit me to collect and present to the board any information about its possibilities and feasibility.”

It’s a case of he said, she said. We might never know to the extent this strategic vision was reviewed or the full reasoning for the company’s decision.

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But what is apparent is the undeniable value of communication throughout all levels of the organization – especially among leaders behind those boardroom doors.

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Discussing the Value of Risk Management at the RIMS Risk Summit

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Late last week, 15 of the world’s top risk managers gathered at RIMS Risk Summit 2013 steps from Wall Street at Zurich’s Manhattan offices. Paul Walker, Ph.D., CPA, from the Center for Excellence in ERM at St. John’s University’s Tobin College of Business kicked off the morning by asking “How does your boss know you’re doing ERM well?”

Even at the highest level, the challenge to communicate and demonstrate the value of risk still can impede the success of a risk management program. While those in the room with complex ERM programs seemed to have buy-in from the C-suite, others still in the process of implementing the discipline struggle “stating their case.”

Later in the day, the conversation turned to reputation risk. A debate circled around that value proposition. Attendees agreed that any risk identification or assessment exercise that failed to include reputation risk would be deemed incomplete by leadership.

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But, the question remained: “Is reputation risk a risk that needs to be managed independently or is an organization’s good reputation a by-product of managing its other risks well?”

While no real consensus was reached, Carol Fox, RIMS director of strategic and enterprise risk practice, acknowledged that discussions like that are the reason the Summit is held and the debate would be something that RIMS explores in greater detail.

At the end of the day, the Summit covered everything from best practices in identifying, assessing, reporting and monitoring risks, to steps for identifying risk appetite and risk tolerance.

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So, that brings us back to the question, “how does your boss know that you’re doing ERM well?

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While it was agreed that benchmarking, case studies, data analytics and other quantitative measures are fundamental to getting ERM off the ground and proving its value, unfortunately if those options fail, sometimes risk practitioners need to wait for a good crisis or a new opportunity to showcase the extent of their ERM program and how it adds quantitative value to the organization.

Crowdsourcing Asteroid Detection

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Back in February, space rocks made headlines in dramatic fashion when Russian motorists filmed a meteorite exploding over Chelyabinsk. Coincidentally, this came on the same day that a larger asteroid came within a mere 17,000 miles from the Earth, becoming the closest asteroid ever observed. This activity got the attention of government officials who began to look into ways to eliminate these threats from space.

This is, of course, easier said than done. While 95% of near-Earth objects one kilometer in diameter or more – the kind that could end civilization if they collided with the planet – have been detected and determined to not pose a threat any time soon, they same cannot be said for the smaller city-killers. There are simply too many of them. According to NASA officials, it will take much more time and money to get a similar handle on every space threat in our celestial neighborhood. And in the meantime, who knows what could be headed our way.

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So as a result, NASA and the White House have decided to bring in reinforcements by asking the public to help in the search. The project will be part of the Obama Administration’s “Grand Challenges” in which the government enlists public/private partnerships, sometimes with financial incentives, to help reach certain ambitious goals. Other Grand Challenges include projects that center around research into the human brain, solar energy and electric vehicles. The asteroid project will also complement NASA’s Asteroid Redirect Mission, which intends to redirect an asteroid into a stable lunar orbit so that astronauts can visit and study it.

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The idea to basically crowdsource asteroid detection is reminiscent of the programs like the X Prize, which have offered financial incentives to the public to do things like create private spacecraft or a fuel-efficient car that gets 100 miles per gallon. The fact that some of these challenges have been successful despite their initially daunting premises could bode well for our future in the cosmos.

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After all, we’ve all seen the movies and I’m pretty sure we all will agree that the apocalypse is better left on screen.

Risk Management: Art or Science?

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Is risk-based security management an art or science? That’s one key question posed to more than 1,200 IT professionals in a recent survey by Tripwire Inc. and  Ponemon Research. The report, “The State of Risk Based Security 2013,” asked: “In your opinion, is information security risk management an ‘art’ or ‘science’?” For the purposes of the survey, “art” was defined as analysis and decision-making based on intuition, expertise and a holistic view of the organization. “Science” refers to risk analysis and decision-making based on objective, quantitative measures. They found:

  • In the U.S., 49% of respondents said “art” and 51% said “science”
  • In the UK, 58% of respondents said “science” and 42% said “art”
  • 66% of enterprise risk managers and 62% of business operations respondents say  risk based security management is “art”
  • 62% of IT security and 56% of IT operations said “science”

“Business operations and risk managers tend to view risk management as more of an art because they don’t feel a precise answer is needed to be able to make a decision,” said Dwayne Melancon, chief technology officer for Tripwire. “People in these roles are looking for directional information to guide their decisions. On the other hand, IT operations and IT security departments tend to view security risk management as a math problem that has a very precise answer. People with these viewpoints are talking about the same thing, but they are using very different language, which can make it difficult to come to a mutually agreed point of view.”

The findings illustrate the diversity of opinion on the use of risk-based security management in the organization. These differences of opinion, those often times valued, can can potentially complicate communication and collaboration that is necessary within a business setting.

The following is an analysis of responses by job title: