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The Failure of Risk Management: Why It's Broken and How to Fix It [Kindle Edition]

Douglas W. Hubbard
4.4 out of 5 stars  See all reviews (9 customer reviews)

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Book Description

An essential guide to the calibrated risk analysis approach

The Failure of Risk Management takes a close lookat misused and misapplied basic analysis methods and shows how someof the most popular "risk management" methods are no better thanastrology! Using examples from the 2008 credit crisis, naturaldisasters, outsourcing to China, engineering disasters, and more,Hubbard reveals critical flaws in risk management methods–andshows how all of these problems can be fixed. The solutions involvecombinations of scientifically proven and frequently used methodsfrom nuclear power, exploratory oil, and other areas of businessand government. Finally, Hubbard explains how new forms ofcollaboration across all industries and government can improve riskmanagement in every field.

Douglas W. Hubbard (Glen Ellyn, IL) is the inventor ofApplied Information Economics (AIE) and the author of Wiley'sHow to Measure Anything: Finding the Value of Intangibles inBusiness (978-0-470-11012-6), the #1 bestseller in businessmath on Amazon. He has applied innovative risk assessment and riskmanagement methods in government and corporations since 1994.

"Doug Hubbard, a recognized expert among experts in the field ofrisk management, covers the entire spectrum of risk management inthis invaluable guide. There are specific value-added take aways ineach chapter that are sure to enrich all readers including IT,business management, students, and academics alike"
—Peter Julian, former chief-information officer of theNew York Metro Transit Authority. President of Alliance Groupconsulting

"In his trademark style, Doug asks the tough questions on riskmanagement. A must-read not only for analysts, but also for theexecutive who is making critical business decisions."
—Jim Franklin, VP Enterprise Performance Managementand General Manager, Crystal Ball Global Business Unit, OracleCorporation.

Product Description


"…shows how to identify and fix hidden problems in risk management. He uses real world examples to reveal serious problems in common quantitative and qualitiative approaches to risk analysis." ( Book News , August 2009)

From the Inside Flap

The 2008 credit crisis, terrorism, Katrina, computer hackers, and air travel disasters all have something in common–the methods used to assess and manage these risks are fundamentally flawed. If risks cannot be properly evaluated, risk management itself becomes the biggest risk. The Failure of Risk Management shows you how to identify and fix these hidden problems in risk management. Ineffective risk management methods, often touted as "best practices," are passed from company to company like a bad virus with a long incubation period: there are no early indicators of ill effects until it′s too late and catastrophe strikes. Exploring why risk management fails—the failure to measure and validate methods as a whole or in part; the use of components known not to work; and not using components that are known to work— The Failure of Risk Management shows you how to measure the performance of risk management in a meaningful way, identify where risk management is broken, and fix it. Respected expert and bestselling author Douglas Hubbard–creator of the critically praised Applied Information Economics (AIE)—uses real–world examples to reveal the serious problems in our current approaches to risk analysis. Hubbard skillfully illustrates how to use a calibrated risk analyses approach, and the many benefits that go along with it, along with checklists and practice examples to get you started. One of the first resources to apply risk management across all industries, The Failure of Risk Management provides you with the tools you need to hit the ground running with radically better risk management solutions. Here, you′ll discover: The diversity of approaches to assess and mitigate risks Why many influential methods–both qualitative and quantitative don′t work Why we shouldn′t always trust assessments based on "experience" alone The fallacies that stop you from adopting better risk management methods How those who develop models of risks justify (in error) excluding the biggest risks Adding empirical science to risk management

Product details

  • Format: Kindle Edition
  • File Size: 1467 KB
  • Print Length: 308 pages
  • Page Numbers Source ISBN: 0470387955
  • Publisher: Wiley; 1 edition (6 April 2009)
  • Sold by: Amazon Media EU S.à r.l.
  • Language: English
  • ASIN: B0026LTMAU
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Enabled
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (9 customer reviews)
  • Amazon Bestsellers Rank: #280,707 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

4.4 out of 5 stars
4.4 out of 5 stars
Most Helpful Customer Reviews
4 of 4 people found the following review helpful
I bought this book following some high recommendations from various risk management consultants.

Hubbard does an excellent job of describing the various qualitative and subjective approaches that are currently used in the risk management world and the flaws and biases that often result in their application. Before reading the book I was skeptical of his claim that some of the methods in use today (risk/heat maps to name a few) are actually worse than useless, but by the end of the book I found myself agreeing with his viewpoint given the well researched and laid out argument he puts forward.

At a time when quantitative risk models are being questioned Hubbard quite rightly points out that if the quality of data being used as inputs is of sufficient quality and over a suitable time frame then quantitative risk analysis can help rescue the current failures occurring within risk analysis.

Towards the end of the book he goes into detail on the merits and practical use of some of the methods he advocates such as Monte Carlo simulations and Bayesian analysis which provides a useful guide to practical implementation.

Overall a great read and a useful reference guide.
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14 of 15 people found the following review helpful
5.0 out of 5 stars Excellent, thought provoking and easy to read! 3 May 2010
If you work in risk management and have previously only been exposed to the traditional qualitative rating systems then you should go read this book immediately.

I work in information risk management and I absolutely loved it this book. I found it raised a number of questions I already had in the back of my head about the effectiveness of risk management and also posed some ideas that were completely new to me.

Also, this is not a dry risk management book in any sense and is full of anecdotes and examples from Doug's work making it a very easy read.

If you enjoy this book I would also highly recommend Doug's other book "How to Measure Anything". This is the perfect accompaniment to this book as after reading this book you will want to learn more!

I would recommend this book to anyone in risk management and while the ideas put forth in the book may not be for everyone, it definitely will get you thinking about the way you assess risk.
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4 of 4 people found the following review helpful
5.0 out of 5 stars Excelent 11 Feb. 2011
Over the past year I have been researching into the various methods to identify backlog maintenance problems, assess their probable timeframe of failure, and their un-planned failure vs. a planned replacement/repair process in relation to their prioritisation and funding. Needles to say, I find Douglas Hubbard's approach to such problems is: straight forward, practical and outstrips any other that I have reviewed. I have begun to implement his techniques with exceptional results. I recomend to any person within a management role of all types to read both: How to measure anything and The failure of risk managent.
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10 of 11 people found the following review helpful
5.0 out of 5 stars Review of Risk Management 14 Feb. 2010
As a (construction) project manager and PhD candidate in management science (risk) I unreservedly reccommend this book for practitioners as well as management students. Douglas Hubbard suggests that for projects/ corporate objectives to succeed, a unified risk perspective is needed to cut across different disciplines, described in the book as the 'four horsemen' such as engineering (war quants), finance (economists) and insurance, in effect a project team. Derived from the Game Theory, Decision Analysis/ Decision Theory provides this perspective and can be utilised to provide this perspective.

Keeping in mind the fact that each of these professionals is differently trained and has different expectations of a project, a deeper understanding of quantitative risk management will cut across boundaries of profession and specialisation, permitting managers to take more informed decisions.

I wish I had this book available when I worked on my MSc dissertation!
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2 of 2 people found the following review helpful
5.0 out of 5 stars Great 24 Dec. 2011
By Ariane
I love this book. It openly critises all the methodological mistakes spread by non quants and self proclaimed risk managers eapecially since the development of operational risk in financial services. It insists on the importance of measuring risks and probabilities and demonstrates to those who did not know that it is both feasible and practical. A must read to all serious risk managers.
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