GREATEST RISK OF RISK MANAGEMENT
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- Details
- Parent Category: Main Site Content
- Category: Risk Management
- Created on Wednesday, 31 January 2018 06:53
- Last Updated on Wednesday, 31 January 2018 06:53
- Published on Wednesday, 31 January 2018 06:53
- Written by Joe Schmidt
- Hits: 7951
Unfortunately, intelligence doesn’t translate into creating and implementing solid risk management strategies. Something’s missing, and, based our experience, that “something” is fairly consistent regardless of a client’s scope and scale, professional background, or financial profile.
When risk management recommendations are proposed to producers, their teams, or their CFO, and they fail to consistently implement strategies, it means they either don’t trust the advice or don’t trust themselves, and this puts them at risk.
Advisors make recommendations because they believe, given what they know, that the markets warrant specific protection practices. Protection and profitability are the value delivered, or in other words, the “what client’s get” as a result of the relationship. Yet many producers admit they have been reluctant to act on recommendations at times.
Hesitancy is Common
Failure to respond to advice is more common that you might expect—even among producers of significant influence. You know your risk management relationship is not working if you are not getting deliverable value. If you are engaged in any business that requires hedging production, you have a vested interest in understanding fostering behaviors that magnify risk management advising and execution.
Consider going through this exercise as you look at your risk management beliefs, behaviors and relationships:
1. Evaluate outcomes: is your operation realizing the value of risk management advising?
2. Expose the cause: what operational behaviors, beliefs, and protocols prevent effective participation in making good risk management decisions?
3. Evaluate the nature of your risk managers: do you, your bankers, and the members or your advisory team have the behavioral capacity to lead risk management?
4. Understand the science: what causes human beings to be poor risk managers?
5. Perfect the “how”: what beliefs, behaviors, and practices should you shift to be more effective?
