{"product_id":"the-failure-of-risk-management-isbn-9781119522034","title":"The Failure of Risk Management","description":"\u003cp\u003e\u003cb\u003eA practical guide to adopting an accurate risk analysis methodology\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003ci\u003eThe Failure of Risk Management \u003c\/i\u003eprovides effective solutionstosignificantfaults in current risk analysis methods. Conventional approaches to managing risk lack accurate quantitative analysis methods, yielding strategies that can actually make things worse. Many widely used methods have no systems to measure performance, resulting in inaccurate selection and ineffective application of risk management strategies. These fundamental flaws propagate unrealistic perceptions of risk in business, government, and the general public. This book provides expert examination of essential areas of risk management, including risk assessment and evaluation methods, risk mitigation strategies, common errors in quantitative models, and more. Guidance on topics such as probability modelling and empirical inputs emphasizes the efficacy of appropriate risk methodology in practical applications. \u003c\/p\u003e \u003cp\u003eRecognized as a leader in the field of risk management, author Douglas W. Hubbard combines science-based analysis with real-world examples to present a detailed investigation of risk management practices. This revised and updated second edition includes updated data sets and checklists, expanded coverage of innovative statistical methods, and new cases of current risk management issues such as data breaches and natural disasters.\u003c\/p\u003e \u003cul\u003e \u003cli\u003eIdentify deficiencies in your current risk management strategy and take appropriate corrective measures\u003c\/li\u003e \u003cli\u003eAdopt a calibrated approach to risk analysis using up-to-date statistical tools\u003c\/li\u003e \u003cli\u003eEmploy accurate quantitative risk analysis and modelling methods\u003c\/li\u003e \u003cli\u003eKeep pace with new developments in the rapidly expanding risk analysis industry\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eRisk analysis is a vital component of government policy, public safety, banking and finance, and many other public and private institutions. \u003ci\u003eThe Failure of Risk Management: Why It's Broken and How to Fix It\u003c\/i\u003e is a valuable resource for business leaders, policy makers, managers, consultants, and practitioners across industries. \u003c\/p\u003e \u003cp\u003eAbout the Author xi\u003c\/p\u003e \u003cp\u003ePreface xiii\u003c\/p\u003e \u003cp\u003eAcknowledgments xvii\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart One An Introduction To The Crisis 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e1 Healthy Skepticism for Risk Management 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA “Common Mode Failure” 5\u003c\/p\u003e \u003cp\u003eKey Definitions: \u003ci\u003eRisk Management \u003c\/i\u003eand Some Related Terms 8\u003c\/p\u003e \u003cp\u003eWhat Failure Means 14\u003c\/p\u003e \u003cp\u003eScope and Objectives of This Book 17\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e2 A Summary of the Current State of Risk Management 21\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA Short and Entirely-Too-Superficial History of Risk 21\u003c\/p\u003e \u003cp\u003eCurrent State of Risk Management in the Organization 25\u003c\/p\u003e \u003cp\u003eCurrent Risks and How They are Assessed 26\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e3 How Do We Know What Works? 35\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAnecdote: The Risk of Outsourcing Drug Manufacturing 36\u003c\/p\u003e \u003cp\u003eWhy It’s Hard to Know What Works 40\u003c\/p\u003e \u003cp\u003eAn Assessment of Self-Assessments 44\u003c\/p\u003e \u003cp\u003ePotential Objective Evaluations of Risk Management 48\u003c\/p\u003e \u003cp\u003eWhat We May Find 57\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e4 Getting Started: A Simple Straw Man Quantitative Model 61\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA Simple One-for-One Substitution 63\u003c\/p\u003e \u003cp\u003eThe Expert as the Instrument 64\u003c\/p\u003e \u003cp\u003eA Quick Overview of “Uncertainty Math” 67\u003c\/p\u003e \u003cp\u003eEstablishing Risk Tolerance 72\u003c\/p\u003e \u003cp\u003eSupporting the Decision: A Return on Mitigation 73\u003c\/p\u003e \u003cp\u003eMaking the Straw Man Better 75\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart Two Why It’s Broken 79\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e5 The “Four Horsemen” of Risk Management: Some (Mostly) Sincere Attempts to Prevent an Apocalypse 81\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eActuaries 83\u003c\/p\u003e \u003cp\u003eWar Quants: How World War II Changed Risk Analysis Forever 86\u003c\/p\u003e \u003cp\u003eEconomists 90\u003c\/p\u003e \u003cp\u003eManagement Consulting: How a Power Tie and a Good Pitch Changed Risk Management 96\u003c\/p\u003e \u003cp\u003eComparing the Horsemen 103\u003c\/p\u003e \u003cp\u003eMajor Risk Management Problems to Be Addressed 105\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e6 An Ivory Tower of Babel: Fixing the Confusion about Risk 109\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Frank Knight Definition 111\u003c\/p\u003e \u003cp\u003eKnight’s Influence in Finance and Project Management 114\u003c\/p\u003e \u003cp\u003eA Construction Engineering Definition 118\u003c\/p\u003e \u003cp\u003eRisk as Expected Loss 119\u003c\/p\u003e \u003cp\u003eDefining Risk Tolerance 121\u003c\/p\u003e \u003cp\u003eDefining Probability 128\u003c\/p\u003e \u003cp\u003eEnriching the Lexicon 131\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e7 The Limits of Expert Knowledge: Why We Don’t Know What We Think We Know about Uncertainty 135\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Right Stuff: How a Group of Psychologists Might Save Risk Analysis 137\u003c\/p\u003e \u003cp\u003eMental Math: Why We Shouldn’t Trust the Numbers in Our Heads 139\u003c\/p\u003e \u003cp\u003e“Catastrophic” Overconfidence 142\u003c\/p\u003e \u003cp\u003eThe Mind of “Aces”: Possible Causes and Consequences of Overconfidence 150\u003c\/p\u003e \u003cp\u003eInconsistencies and Artifacts: What Shouldn’t Matter Does 155\u003c\/p\u003e \u003cp\u003eAnswers to Calibration Tests 160\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e8 Worse Than Useless: The Most Popular Risk Assessment Method and Why It Doesn’t Work 163\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA Few Examples of Scores and Matrices 164\u003c\/p\u003e \u003cp\u003eDoes That Come in “Medium”?: Why Ambiguity Does Not Offset Uncertainty 170\u003c\/p\u003e \u003cp\u003eUnintended Effects of Scales: What You Don’t Know Can Hurt You 173\u003c\/p\u003e \u003cp\u003eDifferent but Similar-Sounding Methods and Similar but Different-Sounding Methods 183\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e9 Bears, Swans and Other Obstacles to Improved Risk Management 193\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAlgorithm Aversion and a Key Fallacy 194\u003c\/p\u003e \u003cp\u003eAlgorithms versus Experts: Generalizing the Findings 198\u003c\/p\u003e \u003cp\u003eA Note about Black Swans 203\u003c\/p\u003e \u003cp\u003eMajor Mathematical Misconceptions 209\u003c\/p\u003e \u003cp\u003eWe’re Special: The Belief That Risk Analysis Might Work, but Not Here 217\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e10 Where Even the Quants Go Wrong: Common and Fundamental Errors in Quantitative Models 223\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA Survey of Analysts Using Monte Carlos 224\u003c\/p\u003e \u003cp\u003eThe Risk Paradox 228\u003c\/p\u003e \u003cp\u003eFinancial Models and the Shape of Disaster: Why Normal Isn’t So Normal 236\u003c\/p\u003e \u003cp\u003eFollowing Your Inner Cow: The Problem with Correlations 243\u003c\/p\u003e \u003cp\u003eThe Measurement Inversion 248\u003c\/p\u003e \u003cp\u003eIs Monte Carlo Too Complicated? 250\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart Three How to Fix It 255\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e11 Starting with What Works 257\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSpeak the Language 259\u003c\/p\u003e \u003cp\u003eGetting Your Probabilities Calibrated 266\u003c\/p\u003e \u003cp\u003eUsing Data for Initial Benchmarks 272\u003c\/p\u003e \u003cp\u003eChecking the Substitution 280\u003c\/p\u003e \u003cp\u003eSimple Risk Management 285\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e12 Improving the Model 293\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eEmpirical Inputs 294\u003c\/p\u003e \u003cp\u003eAdding Detail to the Model 305\u003c\/p\u003e \u003cp\u003eAdvanced Methods for Improving Expert’s Subjective Estimates 312\u003c\/p\u003e \u003cp\u003eOther Monte Carlo Tools 315\u003c\/p\u003e \u003cp\u003eSelf-Examinations for Modelers 317\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter\u003c\/b\u003e \u003cb\u003e13 The Risk Community: Intra- and Extra-organizational Issues of Risk Management 323\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eGetting Organized 324\u003c\/p\u003e \u003cp\u003eManaging the Model 327\u003c\/p\u003e \u003cp\u003eIncentives for a Calibrated Culture 331\u003c\/p\u003e \u003cp\u003eExtraorganizational Issues: Solutions beyond Your Office Building 337\u003c\/p\u003e \u003cp\u003ePractical Observations from Trustmark 339\u003c\/p\u003e \u003cp\u003eFinal Thoughts on Quantitative Models and Better Decisions 341\u003c\/p\u003e \u003cp\u003eAdditional Calibration Tests and Answers 345\u003c\/p\u003e \u003cp\u003eIndex 357\u003c\/p\u003e   \u003cp\u003e\u003cb\u003eDOUGLAS W. HUBBARD\u003c\/b\u003e is the inventor of Applied Information Economics (AIE). His methodology has earned him critical praise from Gartner and Forrester Research. He is also the author of \u003ci\u003eHow to Measure Anything: Finding the Value of Intangibles in Business\u003c\/i\u003e and \u003ci\u003eHow to Measure Anything in Cybersecurity Risk\u003c\/i\u003e. His articles appear in \u003ci\u003eNature, The American Statistician, The IBM Journal of R\u0026amp;D, InformationWeek\u003c\/i\u003e and many more. He has over 30 years of experience in management consulting focusing on the application of quantitative methods in decision making   \u003c\/p\u003e\u003cp\u003eDecision-makers at organizations in any field rely on risk management and analysis methods presumably to improve critical decisions. However, commonly used methods show little evidence of improving decisions. Instead, they could actually make decisions worse. \u003c\/p\u003e\u003cp\u003eThis is because many of the most popular risk management tactics aren't rooted in sound quantitative analysis. In the \u003ci\u003eSecond Edition\u003c\/i\u003e of \u003ci\u003eThe Failure of Risk Management\u003c\/i\u003e, Douglas W. Hubbard, inventor of Applied Information Economics (AIE), addresses how organizations and governments can perform risk analysis properly. He also explains how many basic methods are misapplied, helping readers better understand what steps they must take to improve their risk management techniques. \u003c\/p\u003e\u003cp\u003eThis latest edition of \u003ci\u003eThe Failure of Risk Management\u003c\/i\u003e is particularly useful to decision-makers adapting to a fast-changing world. It includes updated examples citing such recent events as natural disasters and data breaches, describes additional statistical methods, and incorporates updated research. The reader learns about effective methods which can start simple and evolve as needed. \u003c\/p\u003e\u003cp\u003eDouglas Hubbard is the ideal author to share this knowledge. His AIE methodology has been used by organizations in numerous fields, including cybersecurity, aerospace, biotech, commercial real estate, entertainment, and military logistics, among many others. Leveraging decades of experience in risk management, as well as real-world case studies, he identifies key weaknesses preventing organizations of all kinds from improving their risk management techniques. Additionally, he identifies which methods have been shown to work. \u003c\/p\u003e\u003cp\u003eEffective risk management plays an essential role in effective decision- making. By applying the insights provided in this book, you'll find yourself (and your organization as a whole) making smarter decisions based on techniques that have shown a measurable benefit.     \u003c\/p\u003e\u003cp\u003e\u003cb\u003eLearn Why Risk Management is Still Broken and How to Fix It\u003c\/b\u003e \u003c\/p\u003e\u003cp\u003eThe risk management field is constantly evolving. Unfortunately, many organizations fail to evolve with it. They frequently apply risk management techniques that are proven not to work. These dangerously flawed methods are mere placebos which do nothing to reduce risk and improve decisions. \u003c\/p\u003e\u003cp\u003eThat doesn't need to be the case. In \u003ci\u003eThe Failure of Risk Management\u003c\/i\u003e, \u003ci\u003eSecond Edition\u003c\/i\u003e renowned risk analysis expert Douglas W. Hubbard explains why certain common risk management techniques are causing bad decision making. He also explains which techniques actually deliver genuine value. Through case studies, review of existing research, and detailed procedures, Hubbard illustrates how decision-makers at organizations in any and all industries can adjust their risk management methodologies to better suit the demands of the modern world. \u003c\/p\u003e\u003cp\u003eOnce you understand the reason popular risk management techniques don't work, you'll know what you must do to ensure your organization thrives in the future.  \u003c\/p\u003e\u003cp\u003e\"Some study the theory of risk management. Some actively engage in risk management and find that what works in theory does not always work in practice. Some develop new technologies that will make risk management work better in the future. Doug Hubbard does all three. That's why this book should be your risk management must-read.\"\u003cbr\u003e \u003cb\u003e—SAM L. SAVAGE, P\u003c\/b\u003e\u003cb\u003eh\u003c\/b\u003e\u003cb\u003eD,\u003c\/b\u003e Executive Director, ProbabilityManagement.org, Author, \u003ci\u003eThe Flaw of Averages: Why we Underestimate Risk in the Face of Uncertainty\u003c\/i\u003e \u003c\/p\u003e\u003cp\u003e\"Combining solid research with unassailable logic and examples, Douglas describes why today's common risk measurement beliefs and practices are profoundly flawed. Perhaps more importantly, he provides alternative methods that are effective and practical. His 'start simple and evolve from there' strategy is spot-on, proving that you don't need high levels of complexity or a PhD  in math to make significantly better-informed risk management decisions. This book should be required reading for anyone whose job responsibilities include risk management.\"\u003cbr\u003e \u003cb\u003e—JACK JONES,\u003c\/b\u003e RiskLens Co-Founder and Chief Scientist, Creator of the FAIR method \u003c\/p\u003e\u003cp\u003e\"Not long after the Great Recession of 2008, I assigned my students the \u003ci\u003eFirst Edition\u003c\/i\u003e of \u003ci\u003eThe Failure of Risk Management\u003c\/i\u003e as required reading. My students still tell me that they turn to this book in their professional careers. Hubbard disrupted the world of risk consultants with this masterpiece and with its \u003ci\u003eSecond Edition\u003c\/i\u003e he brings us fresh examples and insights from new research.\"\u003cbr\u003e \u003cb\u003e—PETER ALAN SMITH,\u003c\/b\u003e Professor of Insurance and Risk Management, College of Charleston School of Business \u003c\/p\u003e\u003cp\u003e\"The \u003ci\u003eFirst Edition\u003c\/i\u003e of \u003ci\u003eThe Failure of Risk Management\u003c\/i\u003e demolished myths and mistakes and the thinking that qualitative assessments are 'good enough.' The \u003ci\u003eSecond Edition\u003c\/i\u003e extends this excellent work with new useful and practical methods to be quantitative in assessing risk and taking actions to manage it.\"\u003cbr\u003e \u003cb\u003e—STEVE ROEMERMAN,\u003c\/b\u003e Lone Star Chairman and CEO\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47990226223333,"sku":"NP9781119522034","price":52.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781119522034.jpg?v=1761786980","url":"https:\/\/k12savings.com\/products\/the-failure-of-risk-management-isbn-9781119522034","provider":"K12savings","version":"1.0","type":"link"}