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Second-order derivative: Difference between revisions
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This much we all understand. This is part of the ordinary, irrational panic that boils over in any sizeable institution should any of its risk controllers be asked, without sufficient warning, to deal with a situation that appears to require ''controlling'' some ''risk''. | This much we all understand. This is part of the ordinary, irrational panic that boils over in any sizeable institution should any of its risk controllers be asked, without sufficient warning, to deal with a situation that appears to require ''controlling'' some ''risk''. | ||
The [[second-order derivative|''second-''order derivative]] of that function ƒ is more subtle. This is a derivative of the [[first-order derivative]] of that function, and it sits | The [[second-order derivative|''second-''order derivative]] of that function ƒ is more subtle. This is a derivative of the [[first-order derivative]] of that function, and it sits with the management layer, manifesting itself only in wing-dings, Gantt-charts and [[RAG status|traffic lights]]. | ||
So, for example: the [[warning light]] on a control panel, the [[RAG status]] on a [[Middle management|management]] [[PowerPoint]], or a bubble chart showing the numerical ''quantity'' of an item (completed ISDA [[negotiation]]s; reviewed legal [[netting opinion]]s, executed [[Confidentiality agreement|NDA]]<nowiki/>s) whose ''quality'' one doesn’t have the [[subject matter expert]]ise to assess. | |||
The second-order derivative is not the fact that the main reactor has scrammed due to a coolant system fault which exposed the uranium fuel rods, nor even that klaxons are blaring and warning lights flashing that indicate that this might have happened; it is the report that advises that there is a warning light on a dashboard that indicates a reactor melt down. | |||
Why do we mention this? Because ''this is as close as management ever gets''. It is only at this point that it might sit up and take notice. But management’s chief concern will be not ensuring that the coolant system is working, or that the rods are no longer melting down, but that the [[RAG status]] on the control panel warning light indicator report ''goes back to green''. | |||
[[Operations]] people deal with ''actual'' risks; [[legal eagle]]s and fellow [[Controllers|controller]] [[subject matter expert]]s deal with ''[[first-order derivative]]s'' of those actual risks — what the consequences are if the risk comes about — and [[middle management]] and [[internal audit]] deal with ''[[second-order derivative]]s'', being derivatives of those [[first-order derivative]]s of the underlying risk: what the [[RAG status]] on the [[opco]] dashboard should look like if a [[NAV trigger]] is hit; whether the template [[confidentiality agreement]] as been reviewed within the six-month time limit arbitrarily prescribed by some policy for the review of standard form legal agreements — that kind of thing. | [[Operations]] people deal with ''actual'' risks; [[legal eagle]]s and fellow [[Controllers|controller]] [[subject matter expert]]s deal with ''[[first-order derivative]]s'' of those actual risks — what the consequences are if the risk comes about — and [[middle management]] and [[internal audit]] deal with ''[[second-order derivative]]s'', being derivatives of those [[first-order derivative]]s of the underlying risk: what the [[RAG status]] on the [[opco]] dashboard should look like if a [[NAV trigger]] is hit; whether the template [[confidentiality agreement]] as been reviewed within the six-month time limit arbitrarily prescribed by some policy for the review of standard form legal agreements — that kind of thing. | ||