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| :(f) Payment of lip-service to politically astute norms. Diversity a case in point. <br> | | :(f) Payment of lip-service to politically astute norms. Diversity a case in point. <br> |
| :(g) Most insurance is a mug’s game <br> | | :(g) Most insurance is a mug’s game <br> |
| :(h) Chicken Licken - we spend large parts of our daily life catering for contingencies that will never happen. Look upon a control function as a sort of insurance against risks : you pay a cost up front ( in time and organisational resources) to have someone manage the risk. Ask<br>
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| :::(i) Are these live contingencies or comfort blankets – paper tigers and imaginary monsters that we are professionally incentivised to treat as real? <br>
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| :::(ii) Let’s go with it and allow that these are real risks <br>
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| ::::(1) Are these tail risks or every day risks? <br>
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| :::::(a) If they’re everyday risks then the decision what to do about them differs. You can reliably predict the incidence. It becomes an actuarial matter. You can quantify it. Average cost. Expected probability. This is what insurance underwriters do. <br>
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| ::::::(i) Make a binary decision to accept the risk – self insurance) or reject it (no risk, so no insurance) . Either way, don’t buy insurance. No need for a risk manager <br>
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| ::::::(ii) If you accept the risk, reprice the service. This is a bau cost of doing business. Charge your customers the insurance premium. For them it may be tail risk; they may only trade once a year. for You it’s a cost of business. <br>
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| ::::::(iii) If you can’t reprice – if the market won’t stand it - then get out of the fucking business. If someone else has mispriced the risk, they will blow up. OR--- have you? <br>
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| :::::(b) If it’s a tail risk then, okay, its in principle insurable. But still you’ve got some questions. <br>
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| ::::::(i) How big is the risk? How bad would any risk event be? <br>
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| :::::::1. If it is containable (my toaster blew up) given your volume then take the risk. If you buy one toaster, you might buy a warranty. If you buy a toaster a day, save the daily warranty and use that fund to replace defective toasters.<br>
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| :::::::2. If it is catastrophic then you still have done questions. <br>
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| ::::::::a. Is the business worth it? Have you priced it correctly? <br>
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| ::::::::b. How effective is your insurance? Will the risk manager get it right? Will she protect against the risk? Are you sure? <br>
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| :(i) Risk and trade off <br> | | :(i) Risk and trade off <br> |
| :(j) Dumb risk management: we will make this concession for a platinum client but not for a small Client.<br> | | :(j) Dumb risk management: we will make this concession for a platinum client but not for a small Client.<br> |