Airbag - steering-wheel continuum

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The Devil’s Advocate

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In which the curmudgeonly old sod puts the world to rights.

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In a Nutshell: You only need airbags if you don’t steer straight.

The “airbag - steering-wheel continuum” is a management thought experiment[1] that asks: which is your “containment device” of choice?

Where, in other words, does your risk strategy sit, on the spectrum between: “I will conduct my affairs using market experts, whom I have empowered, to deal with sensible customers, whom I know well, in a prudent manner, with a view to maximising shareholder return in the long run and minimising the firm’s exposure to extreme events, even if that means foregoing short-term gains in some cases” — in the terms of this metaphor, this is the “steering wheel” tactic — and “sod it, I have an ejector seat, I’m okay, so dammit, let’s bet the house on red!” — this is an “airbag” tactic.

Should things not go according to plan, the likely outcome of the former is gradual, unspectacular prosperity. The likely outcome of the latter, in the best case is you write off your car, but walk away — with a only a mild case of whiplash and a luxuriant regulatory enema to look forward to.

Risk managers: if your first question, at an unexpected turn of events, is “hey, legal eagles, can I close out?”, you are an airbag sort of person.

Employers: if you hire risk managers who are airbag fans, you are an airbag sort of person.

Don’t be an airbag sort of person.

See also

References

  1. I know what you are thinking: Who knew management experimented with thought?”