What you need to know to stay current in risk management

It’s Thursday July 26th and our latest edition of the Feagin Company Weekly Risk Report: What you need to know to stay current in risk management.

Governance – Strategic Planning and Risk Management


Confirmation bias or “myside” bias occurs when someone has a particular belief or stance and interprets all actions, events, circumstances, etc. as support for their position. It’s pervasive in politics, religion, strategic plans, even relationships…polarizing and destructive. Everyone has bias unless you’re Peter Strzok who recently told Congress “I do not have bias” or Russian President Vladamir Putin, “I am not prejudiced in any way.” Admit it or not, bias finds its way into strategies and perceptions of risk. Integrate risk management with strategic planning by “just doing it.” Purposefully assess strategic plans and identify risks and issues through brainstorming and internal/external experts.  Develop plans and actions to achieve the opportunities. Improve your odds before you roll the dice. Conduct dedicated “risk assessment” events on strategies and don’t play games (see Culture below).


Hot Risk – Blackmail Ware


If you think President Trump has been the only one secretly recorded lately, think again. You may be as well. Smart phones make it extremely easy to unknowingly record conversations. Directors, Officers, managers, BEWARE. It may sound extreme, but all electronic devices should be forbidden in strategic meetings. Who knows, meetings may be shorter and attendees may actually pay attention.


Culture – Speaking of games…


I survived a presentation on “game theory” by a Fortune 50 ERM senior executive recently (misused buzz-phrase; sounds intelligent). A third of the way in, I had that sideways confused look of a dog. “This isn’t game theory” I thought. I didn’t heckle nor did I go fetch. Gamification and game theory are different. Game theory is a zero-sum analysis of scenarios where one person or company’s strategy is completely dependent on the strategic decisions of others; full stop. Often, what is called a “strategy” is really game theory. Vegas, cue the dice, set the odds. His application? The impacts of a new President not sworn in yet. It involved many people role playing and multiple outcomes. If you guessed bias, you guessed correctly. Cost of a senior level, 2-day gaming event with roughly 50 participants…easily North of $40,000. Too bad it wasn’t Monopoly money. Key decisions were made on predicted outcomes which proved wrong a couple of months after the presentation…more sunk costs. Mischaracterizing game theory as a risk can be catastrophic.


Hot topics in ERM – Integrating strategy


Increased ERM focus is being placed on strategic planning integration. Makes sense but a significant barrier to this integration, from my experience, is strategic planners are often esoteric and apprehensive about any “outside” influence. Consequently, risk assessments are often ignored. Transparent leadership welcomes strategic plan risk assessments as part of successful execution. Watch out for bias and game theory when identifying risks to strategy. Integrate strategic planning into ERM by conducting objective risk identification events at all levels of the maturation process. Risk managers: if you want to play in this space, you better build and respect trust and play a strict facilitator role; otherwise, it can be career ending.


Industry – Bias to the moon and back


The only thing Georgia’s Camden County Spaceport initiative may come close to orbiting is the moon that GA Rep. Jason Spencer left behind on the Sacha Baron Cohen show this week. Arguably, Rep. Spencer, Commissioner Steve Howard, and consultant Andrew Nelson are using the “promise of jobs” strategy to sell the idea. Emotional arguments are almost always bias. While objective concerns against this initiative exist from numerous experts, many say they are being ignored. Putin is quoted as saying: “I am the wealthiest man, not just in Europe, but in the whole world. I collect emotions.” Beware of those who collect emotions. Interestingly, game theory would suggest that emotions win over objectivity…unfortunate. Camden Spaceport? Stupid idea though I will give an A+ for wanting to create jobs. Who doesn’t? Some would argue I am being bias, that’s ok. I have orbital mechanics and physics on my side. They are emotionless.


GEO-Political – Baltic States


What’s the likelihood that Putin may see NATO strengthening as a threat and invade the Baltic States of Estonia, Latvia, and Lithuania to send a message that he and Russia are relevant? Article 5 trigger and plausible. On April 3rd, all three Baltic State leaders met with President Trump at the Whitehouse. He described the discussions as “interesting” and stated all three countries are meeting their 2% GDP to NATO. Thankfully, Baltic journalist were on hand to ask some intelligent questions about the threat of Russia and regional stability (read the Whitehouse transcript). The point, don’t just focus on internal risks, study your supply chains, be aware of external risks as well. As I stated in last week’s report, watch the outliers.


The Takedown


  • President Trump expected to issue Executive Orders on Supply Chain threats
  • Twitter and CEO Jack Dorsey up against the ropes as President Trump accuses the company of illegal bias
  • Consider hedging currency and commodity volatility: Steel, aluminum, and other commodities expected to rise on “trade war” actions. Currency manipulation continues.
  • Riskonnect  acquiring Marsh ClearSight
  • Latest NIST Guidebook declares Cybersecurity is everyone’s job
  • China telecom giants Huawei and ZTE in the crosshairs of US Congress due to alleged spying; ZTE survives. Do you trust their devices?
  • ZTE’s entire board and CEO recently replaced. Will things really change?
  • IoT cyber security threats increasing and increasingly ignored or not addressed
  • This day in 1953, Fidel Castro’s 26th of July Revolution started; dictator Fulgencio Batista driven out in 1959


Next Week…


  • Safe Harbors
  • Board of Directors risk management priorities
  • 10 cyber security must do’s
  • Survey results
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