Six Ways Companies Mismanage RiskOhio State University professor René Stulz writes in the Harvard Business Review, “Of course, financial institutions can suffer spectacular losses even when their risk management is first-rate. They are, after all, in the business of taking risks. When risk management does fail, however, it is in one of six basic ways, nearly all of them exemplified in the current crisis. Sometimes the problem lies with the data or measures that risk managers rely on. Sometimes it relates to how they identify and communicate the risks a company is exposed to. Financial risk management is hard to get right in the best of times.” Obviously, risk assessment needs to be tempered with time-tested experience and calculated risks need to cast a wider net when calculated. In summary, here are his six paths to failure:
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