An essential guide to the calibrated risk analysis approach The Failure of Risk Management takes a close look at misused and misapplied basic analysis methods and shows how some of the most popular "risk management" methods are no better than astrology! Using examples from the 2008 credit crisis, natural disasters, outsourcing to China, engineering disasters, and more, Hubbard reveals critical flaws in risk management methods–and shows how all of these problems can be fixed. The solutions involve combinations of scientifically proven and frequently used methods from nuclear power, exploratory oil, and other areas of business and government. Finally, Hubbard explains how new forms of collaboration across all industries and government can improve risk management in every field. Douglas W. Hubbard (Glen Ellyn, IL) is the inventor of Applied Information Economics (AIE) and the author of Wiley′s How to Measure Anything: Finding the Value of Intangibles in Business (978–0–470–11012–6), the #1 bestseller in business math on Amazon. He has applied innovative risk assessment and risk management methods in government and corporations since 1994. "Doug Hubbard, a recognized expert among experts in the field of risk management, covers the entire spectrum of risk management in this invaluable guide. There are specific value–added take aways in each chapter that are sure to enrich all readers including IT, business management, students, and academics alike" —Peter Julian , former chief–information officer of the New York Metro Transit Authority. President of Alliance Group consulting "In his trademark style, Doug asks the tough questions on risk management. A must–read not only for analysts, but also for the executive who is making critical business decisions." —Jim Franklin , VP Enterprise Performance Management and General Manager, Crystal Ball Global Business Unit, Oracle Corporation.
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"…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
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Most Helpful Customer Reviews
11 of 11 people found the following review helpful
Format:Hardcover
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.
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.
6 of 6 people found the following review helpful
Format:Hardcover
So first of all I actually agreed with just about everything the book said, it's what it didn't say that I have an issue with for the following reasons:
1) It's calling itself a book about 'risk management' but in truth it's about 'risk analysis'. The book has some good things to say about improving the forecasting of risk, assessing the probability of risk or impact of risk. However it has nothing to say on what you can actually do about managing the risk once you've worked out how likely it is and how much damage it will do!
2) My goodness is it long, the author actually comments that the original had 50,000 words but this version has 80,000! Those extra 30,000 weren't needed! In my opinion the book spends far too much time explaining whats wrong with risk management methods, here's a clue; if you have purchased a book called 'The failure of risk management' you are likely to agree with the principal and really don't need that much convincing
3) One of the major issues I have with alot of common risk management processes is the assumed relationship between a risk mitigation budget and the impact analysis. I was disappointed that this book didn't address this. In many methodologies the risk mitigation budget is assumed to the probability of the risk times the impact assessment (i.e. a risk that has 10% chance of occurring and a £1m impact if it occurs should have a risk mitigation budget of £100,000) quite why there should be a relationship between this and the actual cost of risk mitigation I am not sure.
In summary, it's not a bad book content wise but unless you are a) new to the subject or b) stupid then it's too long and too narrow. For the record if the author did release a book about actually managing risk then I probably would read it because the subject matter is good but for me this book didn't deliver 'risk management' it just ripped apart 'risk analysis'. . . which it did well
1) It's calling itself a book about 'risk management' but in truth it's about 'risk analysis'. The book has some good things to say about improving the forecasting of risk, assessing the probability of risk or impact of risk. However it has nothing to say on what you can actually do about managing the risk once you've worked out how likely it is and how much damage it will do!
2) My goodness is it long, the author actually comments that the original had 50,000 words but this version has 80,000! Those extra 30,000 weren't needed! In my opinion the book spends far too much time explaining whats wrong with risk management methods, here's a clue; if you have purchased a book called 'The failure of risk management' you are likely to agree with the principal and really don't need that much convincing
3) One of the major issues I have with alot of common risk management processes is the assumed relationship between a risk mitigation budget and the impact analysis. I was disappointed that this book didn't address this. In many methodologies the risk mitigation budget is assumed to the probability of the risk times the impact assessment (i.e. a risk that has 10% chance of occurring and a £1m impact if it occurs should have a risk mitigation budget of £100,000) quite why there should be a relationship between this and the actual cost of risk mitigation I am not sure.
In summary, it's not a bad book content wise but unless you are a) new to the subject or b) stupid then it's too long and too narrow. For the record if the author did release a book about actually managing risk then I probably would read it because the subject matter is good but for me this book didn't deliver 'risk management' it just ripped apart 'risk analysis'. . . which it did well
3 of 3 people found the following review helpful
Format:Hardcover
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.
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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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... Read more
Published 17 months ago by Ariane
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Published on 11 Feb 2011 by Dr. M Langford
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Review of Risk Management
As a (construction) project manager and PhD candidate in management science (risk) I unreservedly reccommend this book for practitioners as well as management students. Read more
Published on 14 Feb 2010 by Narendra Khanna
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