Tuesday, 30 December 2008

Bad number to end 2008 with

The Japanese stockmarket has closed out the year 42% down.

42 is a very bad luck number in Japan as in Japanese it is Shi Ni which also means death.

Fortunately risk managers are not superstitious.

A headache in the making?

There is a report on Bloomberg today that Rhodia, the French pharmaceutical company is closing down the last paracetamol factory in Europe, unable to match the prices of Chinese and Indian product.

The checks on the overseas factories are apparently fairly frequent and rigorous so that's alright then, or is it?

We wouldn't feel comfortable having all baby milk production based in China at present, we would want a reliable alternative probably based in Europe. The pressures on factories to cut costs can result in all sorts of quality issues and somewhere in the supply chain there could be a rogue company supplying a number of producers. The drug retailers are no longer willing to pay a premium for paracetamol from a plant with decades of contamination free production. The consumer is not getting a choice, but is taking the risk, unlikely though it may be, of ingesting something toxic. Many would be willing to pay more to avoid this.

Paracetamol is widely used by millions of people each year, if there is ever a major product recall because of contamination it will create panic as there may be no suitably trustworthy substitute available in the volume required.

This is one headache we should seek to avoid. Keep a stock of US made paracetamol to hand.

Sunday, 28 December 2008

Kimche and Christmas

On Christmas Day the risks are all well known and there is a process in place to manage them in most households. The turkey has been bought, the oven is working, the guests have arrived, what could possibly go wrong?

This Christmas morning just passed I happened upon one of those low probability high impact risks which could create havoc. Opening one of the cupboards I came on a pack of kimche brought by my son for New Year with the instructions " keep refrigerated". As it was at ambient temperature it had started to ferment and the bag was puffed up like a balloon. I gingerly carried it outside and duly puctured the bag which produced a singularly revolting smell of fermented garlic. Imagine if it had exploded during Christmas lunch - we would have had to evacuate the house!

Tuesday, 16 December 2008

Market reacts badly to deleverage risk

When risks are poorly understood and therefore even more poorly communicated – markets can get hold of the wrong end of the stick and PANIC.

Sunday, 14 December 2008

Replacing toilet paper

A report in a US newspaper mentioned that the demand for satellite base stations was so constant it was like toilet paper - something that will always be required.

But not even toilet paper has a permament market demand. Every new home and every hotel room in Japan now comes equipped with plumbed in toilet seats which replace toilet paper with water and a blast of hot air.

Moral hazard and statistics

For statistics to have any value for decisionmaking they need to be verified and checked for consistency and accuracy.

It is heartening to see Sir Michael Scholar, the head of the new statistics authority, rapping the Government's knuckles for overriding the concerns of the National Statistician and her staff and publishing unverified statistics for the decline of knife crime.

There is a lot of moral hazard in this area for politicians. They can select the statistics which suit their case, knowing that even a rebuke from Sir Michael will go unreported by the tabloids because it is all far too technical. The risk is that public confidence is further eroded in Government statistics - Sir Michael needs a regular platform, probably on the BBC where he can explain the use and abuse of statistics. Then the public will wise up to this kind of chicanery.

Friday, 12 December 2008

Do it at home.

Continuining the theme of Japanese risk management there are moments when the micro-management tendencies in Japanese life start to grate.

There is sense is setting out angled lines on narrow platforms to encourage orderly queues three abreast and something that London underground should consider. However the posters suggesting that people pay attention when walking and texting because their line of sight is curtailed seem rather excessive, unless there are lots of manholes left uncovered, which there aren't.

Most Japanese of all was a large poster displayed prominently at many of the subway stations in Tokyo which showed a drunk salaryman ( office worker) lying across several seats on a train having just vomited . The message is "Don't do it on the train, Do it at home". This does not seem to support family values and is just an example of trying to sweep the problem under the tatami.

Friday, 5 December 2008

Gullible grannies

There has been a 60 minute documentary on Japanese morning TV to educate Japanese grandmothers on the dangers of a telephone scam. The con artists dial at random and just by saying "Hello it's me" persuade elderly women that they are talking to their grandson. They then tell her that they are in trouble with their company and need money,usually around Yen 4 million (Stg 30,000 at present exchange rates) or face the sack. They give details of where the money should be sent.

Despite checks at the banks where they try to explain that this is a scam the grandmothers have parted with over Yen 14,200,000,000 (over Stg 100 million) this year alone. The TV progamme is yet another way of trying to protect them from this scam. It is doubtful that it will have much impact.