A Short Sermon on Risk Management

  1. Risk Management is the attempt to anticipate and prevent or mitigate harms that may be avoidable.
  2. Good Risk Management is inherently simple; adding too many complexities increases the likelihood of overlooking the obvious.
  3. There are three guidelines for effective Risk Management practice:
    1. Use Foresight (don’t wait until you are blindsided by risk);
    2. Exercise Precaution (allow a decent margin of safety for unexpected events);
    3. Put a floor under the Downside Risk (lower the likelihood of catastrophic losses).