Riskcontainment

Risk guy focused on processes and decisions. Fan of the possibilities well-managed risks offer, especially in tech, startups, & firms that dare to think differently.

“You’re Not Getting a New Bike”

Answers to questions you haven’t asked can speak volumes
 
I live in the middle of Copenhagen, where the best way to get from A to B is on a bike. A few years ago, I bought a new bicycle. A month later I was outside the shop asking the owner why the rear brake had gouged the frame.
 
“I don’t know”, he said, folding his arms across his chest, “but you’re not getting a new bike”.
 
His wife had handled the transaction, so I asked to speak to her. When he stormed off to get her, my girlfriend whispered, “A new bike is exactly what you’re going to get”.
 
She came outside and looked at the gouge. ”This is unacceptable”, she said, promptly, “you’re getting a new bike.”
 
Neither my girlfriend or I thought the gouge warranted a new bike - until the dealer mentioned it. It was a useful lesson.

The unasked question
 
An old boss announced that to save money, we were moving to share offices with another department, adding, “no jobs will be affected”. No prizes for guessing that jobs were cut the next quarter.
 
The unprompted denial is as sure a signal as “I don’t mean to toot my own horn, but…” and ranks alongside “unsinkable ship”. The words ”there is nothing to worry about” should cause exactly that, worry.
 
“Nobody will be leaving the Euro”
 
Does this mean that the question is who will be leaving the Euro? This morning a radio host asked a panel of experts what a breakup of the Euro would look like. In 1991 he’d asked a colleague what a break up of the Soviet Union would look like and said both of them had been at a loss. His experts’ opinions were revealing.

Instead of discussing scenarios, they explained why it wouldn’t happen. It’s ironic that after a housing crisis built on a talk of why the market could only go up, we still can’t talk about what it might look like if things go down. Saying “Greece would be crushed, if it left the Euro” won’t help us plan for if it does or recognize a breakup as it approaches.

The new bike
 
For the record, I got new frame and the other parts were transferred from the original frame. The bike lasted almost seven years. Maybe the same will happen to the Euro.

(Source: riskcontainment.com)

Of Course You Can Trust Me

Probability vs. Vulnerability or “What if I trust you, but shouldn’t have?

Danish Amagerbanken went bust on Sunday, which is a drag. Their shareholders feel betrayed, as do their customers, and given that the regulators said it was stable, so should the rest of us. After all, if you can’t trust a Scandinavian bank regulator, who can you trust?

Personally, I have two reasons to be upset. One is that Amagerbanken has a large sign on the roof of my apartment building that helps pay our rent. The second is that I was silly enough to believe the regulators.

Your intuition needs analysis, not ignoring
Looking back, there were two things that should have given me pause. One is that everyone knew that Amagerbanken made a lot of risky property loans in a market that has yet to recover.

The second is that the clock on the sign on my roof has been broken on and off ever since 2008. If you don’t care that tens of thousands of people pass a non-functioning sign advertising your bank every day, it’s probably because you’ve got bigger things to worry about.

Probability vs. Vulnerability
The focus of almost every discussion of Amagerbanken was the probability of their survival – never the consequences of a possible bust. The story was the rescue packages, the executives fired, and the man in charge while the bad loans were made, who died of a heart attack. The potential fall out didn’t register.

Now thousands of firms are stuck with cash they cannot access and face bills they cannot pay. The same goes for local authorities and private account holders. The vast sums invested to save the bank are gone. The damage has only started.
 
Regulators and personal responsibility
The people you owe money don’t care that the regulators should have done a better job. The investments you planned on making with the money now stuck in a busted bank’s bankruptcy resolution process are not going to wait for you. Nobody cares that it’s not your fault.

Given the potential damage, might it not be worth your while to review your vulnerability instead of relying on the word of someone else – even if they are a government “expert”?

Riskcontainment

Riskcontainment