Saturday, 22 December 2007

The greatest risk manager of the ancient world?

Who was the greatest risk manager of the ancient world? Not easy to separate fact from fiction, but here is a possible nomination from Thucydides, the great ancient Greek historian who wrote that:

"Themistocles .. showed both the best grasp of an emergency situation at the shortest notice, and the most far-reaching appreciation of probable future developments,both for evil and for good."

Themistocles saw that Athens needed to develop as a maritime power, in order to expand as an empire, but also to protect itself against the superpower of the time, Persia. His strategy, realised eventually after 14 years , was to build a fleet of 200 galleys, train the Athenians to manoeuvre them effectively and to improve the harbous at Piraeus. In suggesting this course he was going against recent history for the Athenians had defeated the Persians on land at the battle of Marathon. Only by prolonged debate, culminating in a vote by the assembly of citizens which ostracized Aristides, his opponent who favoured developing the army, was he able to succeed.

In 480BC the Athenians with their allies destroyed the Persian fleet at Salamis and in doing so lifted the threat of Persian domination.

Themistocles was a master strategist in concept and implementation, who carried those who would man the galleys with his decision. It is extraordinary that such a fractious democracy could be persuaded to change from the military approach which had proved successful against the Persians.They were, after long debate, realistic enough to understand that infantry would not be sufficient to save them a second time because of the resources of the Persian Empire. Few victors prepare for the next war by such radical change. Beyond the genius of Themistocles it was a triumph for the messy business of democratic decisions.

Monday, 10 December 2007

Idiots and Risk

Rebecca West in her masterpiece "Grey Lamb and Black Falcon" observes that 'idiocy' is the female vice. She explains that the derivation of the word idiot comes from the Greek idiotes which means a private person and in her opinion women were more prone to just taking into account what immediately affects them and their families.

There are several newspapers, the Daily Mail for one, which focus their reporting not on the wider world and its issues but on those private stories which idiots, in the sense that Rebecca West meant, appreciate because they excite but do not threaten. This year the Maddy McKann disappearance has been just such a story and the current reappearance of Mr Darwin, presumed dead 5 years ago another one.

The Idiot's approach to risk tends to focus too much on the impact that risks could have and not enough on the probability that they will occur. Excessive concern over autism and the measles jab has meant the reduction of children being immunised and so the almost certain result of children dying of measles, a threat which had been almost wiped out, until the Idiot's focused on the personal rather than the bigger picture. In trying to protect their own children, parents have greatly increased the risk to all children, including theirs. My grandmother had exactly this view of risk. She was very proud of the fact that she had kept my father free of mumps as a child. When he contracted it from me he was aged 40 and as a consequence went deaf in one ear for the rest of his life.

United we stand, divided we fall when confronting the viral legions.

Sunday, 2 December 2007

Fair shares

Bird flu represent a major risk for the world's population. It also is a big opportunity for the pharmaceutical company that develops a vaccine. The cost of such a vaccine is unlikely to be affordable by many affected countries, including Indonesia where most of the recent cases have occurred. Indonesia is not willing to share its samples with the World Health Organisation unless it gets vaccine plants in return.

The New Scientist in its editorial of 24.11.2007 on the subject suggests a way out of the stalemate

" The pandemics of TB and HIV may provide answers. Here public-private partnerships and other hybrid organisations are forming that are not driven by large profits. They are starting to organise R&D globally to develop drugs and vaccines cooperatively and to distribute them fairly.... everyone must start once again sharing viruses in test tubes before we are sharing them on the wind"


Sustainability is yet again the flavour of the month. A major broker was promoting its importance at a Conference in Sao Paolo two weeks back. 30 years ago my brother and I picked up a cheque for $10,000 in Houston for an essay on sustainability. We focused on what the UK should do with its North Sea Oil Resources and proposed a fund which would be used to develop sustainable alternatives when the oil runs out. Peter Walker, a key figure in the defeat of the miners' strike and a very successful entrepreneur/politician, told us that no government would take such a long term view.

In fact the UK did not blow the oil bonanza, it kept fuel taxes high, but it did not make the significant investments in alternative energy sources that we proposed. Now it needs to.

The prize that we won in 1977 was the George and Cynthia Mitchell Prize for Sustainable Development, sponsored by the Mitchell Energy and Development Corporation and supported by the University of Houston and the Club of Rome. It was awarded at a Conference in Houston on the subject of "Alternatives to Growth" at which Herman Kahn, Tip O'Neill and Jim Wright spoke. I remember that Jim Wright ,a Texan congressman who later succeeded Tip O'Neill as the Speaker of the House of Representatives, stated that there were "no alternatives to growth" - for some in Texas some things never change, but George and Cynthia Mitchell made an investment so that they could.

Tuesday, 27 November 2007

Is the market starting to harden?

For some time now the insurers have been gloomy about 2008 and have been bracing for a softening of premium rates. Just today I have heard the first counter to that , a possible increase of 5% in commerical lines and that several insurers are considering such an increase. This could be wishful thinking plus an attempt to talk up the market, but if one of the reasons for falling premium rates is an excess of capital available to underwrite risks then perhaps we can give more credence to this report. Clearly the impact of the subprime mortgage debacle has been to suck enormous volumes of capital out of the market . So even if insurers are not, so most of them say, seriously affected by the sub prime problems they are also not facing the old problems of excess capital from the banking system looking for a quick return which has the effect of lowering premiums.

Tuesday, 20 November 2007

Lucky General

In November1822 during the Brazilian war of independence from Portugal there was a battle at Piraja in Bahia province. The Brazilian army, although numerically superior were very poorly equipped. As the battle progressed the Brazilian general became concerned that his troops were about to be overwhelmed and ordered the bugler to sound the retreat.

The bugler, whether from fear of incompetence I do not know, did not sound the retreat but rather sounded the cavalry's advance. The Portuguese, who up until then assumed that there were no Brazilian cavalry, were so dismayed that they broke and ran. The Brazilians did not have any cavalry worth the name.

So the unintended consequence of the bugler ordered to sound the retreat was a victory and one that led to the ultimate expulsion of the Portuguese from Brazil. As Napoloeon said about a general, " I don't care how good he is, but is he lucky?"

Tuesday, 13 November 2007

Running out of puff

Asthma is on the increase. In the UK in 2001 it was estimate that 5,100,000 people had asthma of whom 1,100,000 were children under 10. The UK, along with Australia, New Zealand and Ireland has onbe of the highest rates of asthma in the world. The Swiss are up there too. Their most recent figures show 6% of the population has asthma, up from 2% 25 years ago.

It has massive impacts on business- in 2001 over 12,700,000 working days were lost through asthma in the UK.

The causes are very complex - Tristan da Cunha's population has a 50% incidence of asthma because of a genetic predisposition - poor people living close to cockroaches are thought to be more susceptible, pollution from cars and factories contribute.

One of the theories is that asthma is a disease of hygeine. Children in well cleaned homes do not come into contact so much with bacteria and so do not build up the resistance within their bodies. An unintended consequence of cleanliness is perhaps greater susceptibility to asthma. There is also some evidence that certain types of cleaning fluids may create problems, which might explain why there is an Anglo-Saxon cluster of asthma suffering countries on the top of this leader board. Cherchez the cleaning culture.

Wednesday, 7 November 2007

"What they did was priceless"

Although thinking through the risks and then managing them helps better decision making and implementation there are some decisions which do not seem to have any need of risk consideration, or do they?

One that came to mind today as I was in Aldermanbury in the City , where their action is commemorated by a bust and several inscriptions,was the decision by Henry Condell and John Heminge to collect and publish a set of plays. As they said "We have but collected them, and done an office to the dead....without ambition either of selfe profit,or fame, onely to keepe the memory of so worthy a friend and fellow alive."

In financial terms publishing the plays meant that Condell and Heminge gave away their rights to exclusive use of them.

The author had died 7 years previously and had shown no inclination to publish his plays, perhaps because he felt they were the company's property. Condell died 4 years after publication and Heminge 3 years later. Without their efforts the plays would have disappeared because none of the manuscripts have survived.

So after all there was a risk which was that without their action their worthy friend and fellow's memory would have died. Posterity owes them a debt of gratitude for their friend, as you will have guessed, was William Shakespeare.

Tuesday, 6 November 2007

Uncommon risk management

Bomb disposal by hand is extraordinarily high risk. Not only are the bombs meant to be lethal, they are unpredictable because of where they have fallen, the damage they have sustained, the environment they may be in and the unfamiliar techniques by which they may have been constructed.

One of the greatest of all bomb disposal experts , John Bridge, explained how he approached the challenge:

" The more you know about a situation and plan to overcome it, the better. When I had a difficult job,I always worked out a solution the night before,before I went to sleep. When it came to the crunch...,I knew every move and the sequence in which to do it. So I felt no hesitation when it came to it.It's not foolhardiness. You've got to have the best chances of survival."

This was the man who, supported by experienced divers and his team, went down 40 feet into Messina harbour 27 times over a three day period in order to disable over 207 depth charges which had been laid to make the harbour unusable . For this he was awarded the George Cross , later he received the George medal and bar for further exploits. He died in 2006 aged 91. His approach is similar to that of Catherine Destivelle before climbing solo on the North face of the Eiger.Professionalism,planning and attention to detail is the key to managing extraordinary risks.

The Story of John Bridge is taken from Gordon Brown's book"Wartime Courage" which is being serialised in the Daily Telegraph.

Thursday, 1 November 2007


"Knowledge is power?

... Those who bank entirely on dogmatic,deterministic knowledge are outdone by those who apply dynamic knowledge. "Not knowing" does not mean "Knowing nothing", it means asking onself new questions at the right time in each new situation.

The motto Descartes espoused was " Doubt is where wisdom begins".


The above is taken from Munich Re's fascinating review called Chance:Risiko for a risk taking culture, published to celebrate their 125th anniversary. Risk Management is about making better decisions, those who have no decent doubt are accidents waiting to happen.

Thursday, 25 October 2007

The Man who saved the world 45 years ago on Saturday

All of us need heroes and here is a story about someone who in an intolerable situation successfully managed a crisis which could have engulfed the planet. Remarkably it has got very little coverage.

On October 27th 1962, at the height of the Cuban missile crisis, a US warship was enforcing the quarantine of Cuba by depth charging a Russian submarine. To the Russian Captain, running out of oxygen and with temperatures on board around 100F and rising, they were under attack and were honour bound to retaliate regardless of the costs. He ordered that the nuclear weapons should be armed. Russian naval procedure required that the captain and two other officers had to agree to the firing. One second captain agreed, but the other, Second Captain Vasili Arkhipov, argued that the conditions for firing had not been reached, the hull had not been damaged and he succeeded in calming the situation.

The submarine's records are now public and at a Conference held in Havana on October 13th 2002 on the Cuban Missile Crisis, 40 years after the event, Robert MacNamara, the then US Defence Secretary, recognised how much closer to nuclear war we had been than anyone had imagined.

Amongst the lessons from this are:
You need robust processes for your strategy which are clearly understood when working under conditions of great stress and danger.
Moral courage to go ,if necessary, against the opinions of colleagues is essential.
Three heads are better than two in such situations.
The consequences need to be thought through. The US attendees at the Conference admitted that they had not done so thoroughly enough.

Sadly, Vasili Arkhipov died a few years ago, but he deserves a special place in risk and crisis management and in the relation of strategy to decision making.

I, for one, will toast Second Captain Arkhipov this coming Saturday, do you likewise - because of him, you can.

Thursday, 18 October 2007

Big Brother and your car

Every day in the UK 55,000,000 car numberplates are scanned and checked for road tax and insurance.

Every year 40,000 cars found not to have insurance are crushed. As these are mostly of the old banger variety the car stock is being improved by this cull, with the likely, but not proven ,benefits of fewer accidents. Perhaps it could be proved by checking insurance records to see if the number of accidents involving uninsured drivers has decreased over the 6 years since the Motor Insurance Database was set up to meet the requirements of the EU 4th Directive that in event of an accident involving a foreign national the insurer of the car could be immediately indentified.

The Motor Insurance Database has been a hugely successful IT project, carried out, not by the usual suspects - such as IBM or Siemens, but by a team assembled initially by the ABI, one of whom, Penny Coombs, was in charge of their motor insurance division. It required a huge effort by insurers and fleet owners to meet the reporting requirements of the database and because it didn't massively overrun its budget or fail to produce the goods it has vanished from the public's ken.

If it hadn't been created , in an age of international terrorism it would probably have had to have been and then we would have had the MOD creating the specifications. Not a pretty thought.

Tuesday, 16 October 2007

Recruitment without qualifications

Doris Lessing who won the Nobel Prize for Literature last week never attended University as an undergraduate. I am no big fan of academic qualifications , especially now everyone seems to get Upper Seconds, and I would like to celebrate the City's long tradition of giving people opportunities, regardless of where they were educated. The only criterion is can they make money.

The risk companies face now is that as they no longer need a post room, who would with all the postal strikes and the convenience of email, they are hard pressed to find entry points for street smart kids who could go on, like Martin Sullivan the CEO of AIG, to run the company.

Fear not though, just go round to your local coffee bar and chat to the staff who have come from all over the world to work in the City. Some of them have impressive qualifications, most of them have tremendous motivation. The HR departments should take note.

Thursday, 11 October 2007

In Japan after 90, they forget how to die.

Statistics are not all lies, but they need a healthy degree of scepticism, especially when they are projected forward 40 years or so. However every risk manager should take a look at the following UN website if they want to understand the trends that are likely with the ageing of the global population and to tease out the risks.

There is the astonishing fact that, due to the one child policy, the Chinese have 29 million more boys than girls under the age of 24. Then there is the projection that from having 600 million people over 60 in 2000, we will have 1,2 billion in 2025 and 2 billion in 2050, by which time , they estimate, there will be more people over 60 than under 14 on the planet for the first time ever. How will the taxpayers be able to afford all those senior citizen's travel passes, let alone find a car park space for the able bodied?

Of course some of these projections can be way out, but the trend to an older population is clear. In Japan where they have the greatest percentage of people older than 90 of any society in the world and still expect longevity to increase, they celebrate their centenarians' enthusiasm for life every week on what I cannot claim is a riveting TV show.

Have a look at the data from the UN it will raise a lot of questions, including how accurate some of it is.

Wednesday, 10 October 2007

No plan survives contact with the enemy

To illustrate risk management issues and their importance to good decisions you need good stories. Gordon Brown has provided us recently with a very clear example of the dangers of not thinking through the consequences by allowing his staff to talk up the possibility of a general election.

The two mistakes he made were to consider only the upside of what was being suggested - that it would damage the Tories, and set the scene for a successful early election - and he forgot von Moltke's maxim "no plan survives contact with the enemy."

In Brown's case his actions united the Tories, flushed out some of their most attractive policies regarding inheritance tax which turned the marginal seats in their favour, and made David Cameron a winner when he had been on a very bad losing streak. It was one of the most spectacular own goals in recent British political life.

Thursday, 4 October 2007

The largest industry in the global economy

The global Insurance Industry takes in $3.7 trillion in premiums a year and has $17 trillion of assets under management. This makes it , according to the United Nations, the largest industry in the global economy. The UN sees the industry's core competence as risk management. So now you know why you deserve to be so important.

Wednesday, 26 September 2007

Raising standards at no cost

Standards are useful, but when they cost money then many, who would benefit from understanding them and using them, just don't bother.

If you have business in China you might like to know that just a few days ago we arranged for the Chinese Risk Management Standard which was in the more traditional script used in Hong Kong and Taiwan to be translated into simplified Chinese which is more easily accessible to those who live in mainland China. This translation was carried out in less than 2 days by the staff of Ximco Corporation in Shanghai and we are very grateful for their efforts.

The original Risk Management Standard was developed in 2002 by the Institute of Risk Management, the Association of Insurance and Risk Managers and the National Association for Risk Management in the Public Sector. It has been downloaded over 100,000 times in English and is available in French, German, Italian, Spanish, Portuguese, Polish, Dutch, Danish,Swedish, Russian, Arabic, Japanese and now in two forms of Chinese. Here is the link to the new simplified Chinese Risk Management Standard. It is available free of charge, as it should be.

Download the Simlified Chinese Risk Management Standard...

Saturday, 22 September 2007

Unintended Consequences - Bah, Humbug!

The comment from Mervyn King that he was debarred from covert operations to rescue Northern Rock by EU rules, a comment which some European sources have said is a complete misreading of the EU legislations' intent, reminds me of what AIRMIC's Counsel said about the Treasury's implementation of the Insurance Mediation Directive - see my previous blog.

With the Insurance Mediation Directive the lawyers in the Treasury, aided by those in the FSA, were so keen to stick to their principles of regulation (sound familiar?) and the purity of their operation that they disregarded the spirit of the EU Directive and gold plated the regulation so that some groups, such as buyers of insurance, would have to be unnecessarily regulated.

Perhaps they did this because such an approach gives them more power ( this would be the way Japanese bureacrats would work), perhaps because then they can't be blamed as they've covered every eventuality, but perhaps most of all in the "nanny knows best" attitude that pervades the British Civil Service they did it because they are micromanagers and they fear that events will get out their control. Regardless of the FSA's commitment to risk based principles too many of their lawyers are promoting the opposite of a risk taking approach.

Of course in the case of Northern Rock events did get of control. There were "unintended consequence of recent legislation" said the Governor of the BoE which prevented him from acting as he would have liked to restore stability. This is a miserable excuse. The triumvirate of the Treasury, the BoE and the FSA should have been regularly conducting crisis management testing to ensure that any legal obstacles to their actions were identified and action taken before the event to remove them.

Any dependency model which starts with the objective of preventing a run on the banking system ( surely one of the top risks for the triumvirate) would have then searched out the obstacles and assigned weightings to them. The causes of the run are immaterial to the exercise when it comes to legislative limitations on actions. What I would like to know is " Were such models developed, were they tested and why weren't the obstacles which the Governor spoke about identified?".

It seems that the regulators who have preached business continuity planning and stress testing to their markets have been remiss when doing the same for their own operations.

Wednesday, 19 September 2007

How to panic the Treasury

It is no surprise that any decision involving three parties in likely to be a dog's breakfast. And so it is in the case of Northern Rock where the triumvirate is the Treasury, the Bank of England and the Financial Services Authority.

My experience of dealing with the Treasury is that they can only be panicked into action if their preferred modus operandi of doing nothing is going to result in ignominy or ridicule.

Just after 9/11, when it was clear that the insurance market for aviation risks was going to be withdrawn at the end of seven days, the way we (AIRMIC) got the Treasury to come to the party was by leaking a letter to Brown from concerned airlines to the Financial Times who obliged by running it as their lead story on the Thursday. By the Friday evening Brown had announced that the Treasury would act as insurer of last resort, this gave the rest of the world the weekend to figure out what they were going to do before the Monday deadline for removal of coverage.

When the Insurance Mediation Directive from the EU was passed into law by the Treasury they did not devote enough legal resource to defining who they were anticipating the directive to cover, which meant that after they and the FSA had had a go, it turned out that risk managers who purchased insurance on behalf of their subsidiary companies would be considered intermediaries. When asked whether there was any public interest at stake or whether they had intended to regulate risk managers the answer from both bodies was "no". The only way out they advised was to provide a legal opinion as to why risk managers should not be regulated. After considerable expense it was only when AIRMIC got an opinion from counsel which castigated Treasury for their shoddy work of drafting the EU regulations into UK law that suddenly the FSA found an answer and saved everyone a lot of effort.

When I asked the Cabinet Office for a refund of the legal fees they declined.

Tuesday, 18 September 2007

Unintended Consequences of names

Back in the early 1990s the Austrians were found to be adulterating their wines with diethylene glycol (anti-freeze) in order to make them sweeter. When this became public knowledge in Japan the consumers not only stopped buying Austrian wines ,they also gave Australian wines a miss too. If you cannot differentiate your brand sufficiently in the consumers' mind then you may lose out through no fault of your own.

There is a limit to this same name concern and somehow I don't think that Northern Foods or Hard Rock Cafes need to be as agitated at present as the Alliance and Leicester.

However a consequence of the Northern Rock bailout means that the chances of Brown calling an October General Election have almost dropped to zero and Alistair Darling may yet join Norman Lamont and James Callaghan as a Chancellor for whom events in the markets exposed the limitations of their power.

Thursday, 13 September 2007

Man's laughter Manslaughter

Attending the DVS Symposion in Munich today and reading the comments in this morning's Financial Times that"when bombarded by complex information it is human nature to look for a short cut" I am reminded of Ezra Pound's observation that the German word for "to condense" is "Dichten" and for "poetry" it is "Dichtung".

Perhaps risk managers should flex their poetic imaginations and as an example of how to condense the risks associated with a sense of humour consider the upside and downside, the respect that is due to the power of an apostrophe as well as the complexities of English pronunciation in the title of this blog.

Tuesday, 11 September 2007

We must do better than this

A recent study by PCW as reported by the Financial Times in their September 10th special report on Risk Management stated: ( my comments in italics)

"400 senior financial services executives of which almost a quarter (so in the range 95-98) increased their annual spending year on year on risk management by more than 25% year on year for 3 years ( which means they doubled it).

Many companies (not quantified, why not, when everything else is?) do not appear to think they are getting best value for money - (the insinuation appears to be that those who doubled their spending were not getting good value- but there is no data in the article to back this up).

Only half of the risk managers ( how many risk managers were there in the 400?) questioned said the function contributed substantially ( no quantification) more value than it did 3 years ago - and just 23 percent of executives in other disciplines ([400-RM]*23%) believed the same (perhaps these were the ones who doubled their spending on risk management).

Fewer than one in 10 ( no information as to which group, the 400, the non-risk managers or the risk managers is being recorded here) believed that risk management was very effective at enabling managers to make better decisions (does this include financial risk management, before or after the sub prime developments?)."

My gripe is that the writer didn't allow us to see a much wider and linked section of the data so we could make up our own minds as to their importance. Instead confusion was created by selecting from different groups, some with numbers and percentages and some not.

There is no denying though that if only 10% of any of the groups believe that risk management is very effective at enabling managers make better decisions then there is a need for clear and measured examples of how risk management has been effective. Paul Hopkin at AIRMIC is working with DNV on just such a project to quantify the benefits of enterprise risk management in companies with embedded ERM and it will be ready in the first quarter of 2008.

In the meantime you must make do with garbled statistics.

Monday, 10 September 2007

Gordon Brown and the election risks

The risks facing a new Prime Minister as complex, none more so on when to take the risk of an election. The following article has been submitted from a long time observer of the political process in the UK:

In the last two months there has been speculation that Gordon Brown might call an early election. What are the calculations of the risks involved that might determine his choice? The problem for all Prime Ministers is that they alone ultimately make the decision to ask the Queen for a dissolution of Parliament. The convention is that the Queen will not refuse a dissolution, if the Prime Minister has a majority in the House of Commons. This makes the burden of deciding whether or not to call an election an extremely anxious one for Prime Ministers, since a mistake can terminate their political career, not to mention those of many of their associates. Being able to decide the date of the general election (rather than having to serve a fixed term as under most other democratic constitutions) is a supreme advantage but also a supreme curse.

Some of the factors that the Prime Minister must consider are as follows:

1) The state of the opinion polls. The national polls moved strongly in Labour’s favour in July and August, opening up at one stage an eight point lead over the Conservatives. However in the last two weeks the gap has narrowed again.. Most Prime Ministers require a long period ahead in the polls before they will call an election. Margaret Thatcher even before 1983 when she had an overwhelming lead was very reluctant to call an election. James Callaghan famously refused to call an election in October 1978, when Labour had recovered in the polls to be level-pegging in the polls, and suffered a major defeat six months later. The most cautionary tale for Prime Ministers, however, is still Harold Wilson who had a ten point lead in the polls in the spring of 1970, called an early election for June, which everyone expected him to win, but he lost.

Other factors are at work too. The national opinion polls are supplemented by private polls, focus groups, and constituency polls. Unless all these are pointing in the same direction, they are likely to make a Prime Minister more risk averse. There is considerable evidence that Labour does consistently better in national polls than in actual polls, and part of this is because in many of the target seats which the Conservatives have to win to deprive Labour of its majority, local polling show that they are ahead or the contest is very even. Since there are a large number of target seats in London and the South East, this increases the risk of calling a general election on the basis of national polls.

2) A second issue is finance. A British general election campaign is short (typically just over three weeks) but very expensive, and one of the concerns of the Prime Minister is that he has enough funds to fight it, otherwise he could hand a significant advantage to his opponents. Labour’s finances are improving, but have some way to go. This is another negative factor.

3) A third issue is the rationale for calling an early election. This can add to the risk if voters and the media judge that the reason given for calling an early election is insufficient or bogus. This can then rebound on the Prime Minister and his party, as it did with Edward Heath in 1974. Gordon Brown’s reason for calling an early election looks superficially a good one, namely that he would be seeking his own mandate as Prime Minister. But the fact that he has now been two months as Prime Minister and has not announced that he needs to seek a mandate might undermine him, because voters might think the only reason he was calling an early election was because he was being opportunistic (seeking to exploit the temporary disarray of the Conservatives) rather than principled.

4) A fourth issue is opportunity. Some commentators have suggested that irrespective of any of the above, Autumn 2007 represents the best chance for Brown to win an election at any stage in the next three years (an election has to be called by June 2010). This is based on the disarray of the Conservatives in July and August, the Brown bounce in the opinion polls, which stemmed from the perception that this was a new government with new policies. Everything that happens from now on it is suggested will be less favourable. The economy might well go into recession, and house prices fall. Real wages may stagnate, credit may become tighter, and there may have to be sharp squeeze on public spending. All these would damage the standing of the Government and its popularity, since economic competence remains one of the key determinants of voting choices. In addition Brown may not be able to deliver changes to the NHS and other public services which the public see any differently from the changes of the last ten years. The danger that Brown may soon be seen as running not a new government but a continuation of the Blair Government is very real, and that too could mean that October 2007 is as good as it gets for Brown and Labour. The problem for Gordon Brown is deciding whether these risks outweigh the other risks that the poll evidence is not giving an accurate picture of Labour strength in key marginals. If he could be sure that Labour would be defeated if it went to the polls now, he would of course not risk it. He does not want to be the shortest serving Prime Minister since George Canning. But he cannot be sure. It is a balance of risks, and if as most people expect he does not call an election this autumn, he might come to regret it. But most Prime Ministers usually calculate that it is better to be in office than out of it.

Monday, 3 September 2007

"Over time markets will do extraordinary,even bizarre things. A single big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognise and avoid serious risks, including those never before encountered. Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed by today's financial institutions."

Warren Buffett at his last shareholders' meeting as reported inThe Business - London's first global business magazine.

I like the line " including those never before encountered.

Sunday, 2 September 2007

Super Crunchers- How anything can be predicted

Weekend Financial Times Magazine carries an extract from a book by Ian Ayers, entitled "Super Crunchers: How anything can be predicted", published this month by John Murray.

Risk Managers should understand the developments in database decision-making which is what this book is about. One of my contacts in Seattle, a man who headed up Digital Equipment Coorporation's operations in Japan for many years, has sent me a presentation that estimates that by 2020 computers with the capacity of the human brain will cost less than $1000, so the computing power necessary for such a world of database decision making will be available to almost everyone on a median developed world income.

Good news is that the machines,,for the moment, will still need us. Ayers says "Humans are crucial not only in deciding what to test, but also in collecting and, at times, creating the data."

Wednesday, 29 August 2007

Welcome to the Risk Publishing Online blog!

Welcome to our blog, my name is Andrew Laws and I am the website controller for Risk Publishing Online Ltd. Most posts will be made by our Managing Director David Gamble but I may well pop up from time to time!