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Coping strategy: Difference between revisions
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The running cost of exercising coping strategies is inversely proportional to their usefulness. Hiring expert managers to monitor and avoid risk is a full-time, up-front cost. Limits and enforcement tend to be costly to implement. Exoneration costs nothing day-to-day until after the fact, at which point it is both useless and ineffective. If the loss threshold is high enough, you ''will'' get fired. | The running cost of exercising coping strategies is inversely proportional to their usefulness. Hiring expert managers to monitor and avoid risk is a full-time, up-front cost. Limits and enforcement tend to be costly to implement. Exoneration costs nothing day-to-day until after the fact, at which point it is both useless and ineffective. If the loss threshold is high enough, you ''will'' get fired. | ||
===Accidents=== | |||
From Charles Perrow’s {{Br|The Next Catastrophe}}: accidents ''will'' happen. Four strategies for coping: three focus on the accident, one focuses on your organisation. | |||
===== The Accident ===== | |||
*'''Minimise''' chance that accidents happen. | |||
*'''Limit''' damage accidents can cause. | |||
*'''Reduce''' '''vulnerability''' to accidents. | |||
*'''Respond''' when accidents happen. | |||
====== Vulnerability to accidents ====== | |||
Assuming accidents ''will'' happen, reduce vulnerability to them. Vulnerability comes in the form of unusual [[concentrations]]: | |||
* '''Energy''': in a financial services firm, call this financial risk, or profit-and-loss generators | |||
* '''Population''': different models of [[distributed network]]. Compare “hub and spoke” models like airports (fragile — take out a hub and large parts of the system are inoperable) with “multiple-node” networks like the internet (robust — take out a node and everything can flow a different way). | |||
* '''Political power''': increases the vulnerability to harm from [[executive failure]]. | |||
{| class="wikitable" | |||
|+ | |||
! | |||
!Avoidance | |||
!Damage Limitation | |||
!Reaction | |||
!Aftermath | |||
|- | |||
|Strategies | |||
|Know your client; have good data | |||
Manage relationship | |||
Monitor trades | |||
Due diligence | |||
|Credit lines | |||
Trading limits | |||
Red flags | |||
Security/collateral | |||
|Close-out | |||
Events of default | |||
Security | |||
|Internal enquiry | |||
Regulatory enquiry | |||
Litigation | |||
Disciplinary | |||
|- | |||
|Environment | |||
|Calm, orderly, timely, systematic, thorough, inquisitive, patient. | |||
The object is not to be satisfied there is no risk but to to identify where ''is'' the risk. | |||
|On alert. | |||
Stressed, but solvent. | |||
|Chaos: Panic, Urgency, Volatility, Fog of war | |||
|Recriminatory | |||
Coloured by hindsight | |||
Constructing a new narrative | |||
Designed to attribute blame (elsewhere) | |||
|- | |||
|Information quality | |||
|High; unpressured. | |||
Good lines of communication, functioning well. | |||
|Adequate. Communication will deteriorate as the situation gets worse. Counterparts may be economical with information | |||
|At this point, it is likely the information you had was already bad; it will now be worse | |||
|Limited: slow to emerge; vetted; filtered; coloured; constrained; restricted to “optimising facts” | |||
|- | |||
|Effectiveness | |||
|High | |||
|Medium | |||
|Low | |||
|Hostile | |||
|} | |||