| Related articles - All articles - The author - Services |
|
| This website summarised by Matthew Leitch 16th June 2010 |
You don't have to agree with me on everything to get value from this website or to become a client. Some agreement helps, but it isn't essential because I'm here to help you do what you want to do. With that caveat out of the way, what do I really think?
To give you a first sense of what this website is based on, here are some of my favourite themes:
Psychology
Design
Innovation – often based on insights gained from critical analysis
Clarity – especially in writing and thinking
Usefulness
These are themes that often struggle for attention in the world of internal control and risk management, which is one reason this website is unique.
This table should give you a sense of what comes out well on this website and what comes out badly.
| Winners | Losers |
| Natural, logical methods | Unnatural, illogical methods |
| Clear thinking with mental, mathematical, or computer models | Risk registers |
| Plain, self-explanatory terminology | Phrases that don't have clear meaning e.g. risk appetite, risk tolerance |
| Working in ever-improving ways that recognize and manage the limitations of our knowledge | Separate management processes to consider and manage 'risks' |
| Making innovative changes to improve the way we work, sometimes inspired by considering uncertainty | Heavy reliance on detailed itemization of things that could go wrong and adding extra work to try to guarantee results |
| New discoveries, insights, and innovations | Dreary repetition that just about holds position |
| More efficient controls | More mandatory audits |
| Better design skills and more design effort | Endless analysis in the hope that eventually someone will have a good idea about what to do |
| Exploration, innovation, and experimentation | Loyalty to standards on principle |
| Specific behavioural and technical changes | Non-specific cultural change programmes |
| Offering people more useful methods | Trying to convince people that methods are useful regardless of the truth |
| Thinking inspired by fundamental mathematical concepts | Pseudo-quantitative mumbo jumbo |
Finally, these are some of a number of interesting conclusions I have reached over the years that may surprise you.
There is no such thing as 'the' probability of something happening. Probabilities are conditional so it depends what conditions you take into account. I also agree with the Bayesians that it also depends on what you thought before you processed the last bit of evidence.
Risks are not real. Risks are events whose occurrence is uncertain. If we knew they would happen or not happen, with certainty, they would not be risks. So, logically, their existence is only in our minds. Danger is real, the limits of our knowledge are real, but these things we call 'risks' are part of our thinking. Risk analysis is really a process of structuring the fog of uncertainty that surrounds our thinking into something we can think about. (That's the aspiration anyway.) Accordingly, it is misleading to talk of 'identifying' risks; we define them.
Thinking about risks is not a particularly effective way to think under limited knowledge. Very often it is quicker and just as effective to see that there is a lot that we don't know in a particular area of our work and respond to that fact. It is usually more helpful to define uncertainties (typically, as variables in a mental model) than to itemise risks, which are just sets of possible values for those uncertainties. It is almost always more helpful to think in terms of probabilities, distributions, and values than to get embroiled in thinking about risks.
Apparent 'risk aversion' can be explained by common sense, and we don't need to hypothesize an aversion to risk or uncertainty, or utility curves. Obvious, everyday effects can explain most and perhaps all of our apparent aversion to risk.
The main way that risk control can be improved in most organizations is by improving ideas for risk responses, not pouring more effort into analysis. Design skill is where the main opportunities lie.
| Related articles - All articles - The author - Services |
| If you found any of these points relevant to you or your organisation please feel free to contact me to talk about them, pass links or extracts on to colleagues, or just let me know what you think. I can sometimes respond immediately, but usually respond within a few days. Contact details |
|
| About the author: Matthew Leitch is an independent consultant, researcher, and author specialising in internal control and risk management. He is also the author of the new website, www.WorkingInUncertainty.co.uk, and has written two breakthrough books. Intelligent internal control and risk management is a powerful and original approach including 60 controls that most organizations should use more. A pocket guide to risk mathematics: Key concepts every auditor should know is the first to provide a strong conceptual understanding of mathematics to auditors who are not mathematicians, without the need to wade through mathematical symbols. Matthew is a Chartered Accountant with a degree in psychology whose past career includes software development, marketing, auditing, accounting, and consulting. He spent 7 years as a controls specialist with PricewaterhouseCoopers, where he pioneered new methods for designing internal control systems for large scale business and financial processes, through projects for internationally known clients. Today he is well known as an expert in uncertainty and how to deal with it. more |