Diving risks

Carly Spencer,a very experienced diver, specialised in photographing wrecks on the ocean floor such as the Britannic liner in the Aegean, sunk by a mine in 1916. He also participated in medical trials and decompression tests run by universities in Europe and the US.

He commented on the risks that he faced,saying" I am not reckless, my wife and kids are the most important things in the world to me. But I do get a kick out of knowing that I am putting myself at the edge."

Sadly when filming the Britannic on May 24th he had an attack of the bends, which occur when divers come up from the depths too soon and nitrogen bubbles form in their blood. The attack was fatal.

Risks like deep sea diving require very, very strong discipline, extremely reliable equipment and close study of how currents may affect the divers.

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.

High Impact, low probability risk

For more than 10 years the Council of the Association of Insurance and Risk Managers ( AIRMIC) have insisted that their reserves be placed with three separate banks, despite their lead bank offering significantly better interest rates. An example of risk managing for what, for the last ten years, would have been seen as a high impact but low probability risk.

Risks and type

Anne Fadiman is a wonderfully perceptive reader and she throws up lots of risks which attentive proof readers salivate over, some of which have serious consequences. In no particular order:

* misplaced apostrophes and spaces- my example would be man's laughter or manslaughter.
* misspellings as in the opening paragraph of Beverly Sills' memoirs -" When I was only three and still named Beverly Miriam Silverman I sang my first aria in pubic."
* key words missed out - here her example of the 1631 edition of the St James Bible which had the 7th commandment as "Thou shalt commit adultery."
* misplaced decimal point in a ship's mortgage in 1986 by a New York Law firm which cost their client $11 million.
* omitted hyphen by a NASA computer progammer from Mariner I's flight programme which sent the probe off course so badly that it had to be destroyed, thus wasting the $7 million investment.


However in writing this appreciation of her book "Ex Libris, Confessions of a Common Reader" I find myself at risk of offending her by describing it as a masterpiece, which has far too masculine an overtone for one so alert to gender issues in print, yet mistresspiece seems inappropriate and presumptuous and mispiece reads like the female equivalent of codpiece. So here we are, the only way around is to advise you to read her piece de resistance.

Impact on the public domain

Great risk management quote from Sir Edwin Nixon's obituary in the Telegraph today;

"Write nothing internally without considering its impact on the public domain."

Nixon became managing director of IBM UK in 1965 and retired as Chairman of its holding company in 1990, a remarkably long tenure, by today's standards. He also was Chairman of Amersham International from 1988-1996 overseeing notable growth.

In 1968 when I worked at Dexion, known for its slotted angle storage systems , Eddie Nixon was still proudly remembered after his four year stint as a Dexion management accountant, his first business post, as " the one who got away". He certainly managed his career risks extremely well and the obituary records that "although both approachable and good humoured, he was at the same time a perfectionist who liked things done well, and with style."

How does your CEO match up?

Holidays, fun and risk

Holidays away from home are fraught with risks. You are in an unfamiliar place, exposed to unfamiliar weather, eating unfamiliar food and without the restraints that normally you recognise. On top of all of this you have the absurd expectation that, because you are on holiday, nothing can go wrong. Truth is you don't want to think about details when you are on holiday.

I have seen a middle aged European holidaymaker agree to be strapped into a parachute harness and towed into the sky by a motor launch off a Phuket beach whilst a Thai lad, sitting on his shoulders, manipulated the parachute cords to steer him around the bay. To make matters worse the boat did not have a clear run to get up speed, but had to weave its way through the swimmers near the beach.

The issue was not did he have insurance - it would probably not have paid out if there had been an accident - but why did he not recognise the danger and the slapdash nature of the people who he was about to risk his life with. Maybe he was too laden with alcohol to take a sensible view, even more likely he thought it a good idea at the time and, his protective mantra was " nothing can go wrong, 'cos I'm on holiday." Nine times out of ten there was no problem, but those are only slightly better odds than Russian roulette.

The same lack of thought can happen on company away days, where risks are taken, often by the chief executive, with the whole management team, in the interests of bonding. There is usually no attempt to understand the risks and to get the team to find ways of mitigating them, there is just the focus on the goal of having a good time and there is sometimes an element of bullying . Directors who allow such thoughtless risk taking may find themselves faced with a corporate manslaughter charge if things go wrong. On holiday you're on your own.

Sounds familiar

Compare and contrast -

"It is clear that there has been a mispricing of risk.The Market did not understand the value or importance of liquidity and some banks did not fully understand some of the instruments they were dealing in."
Mervyn Davies, Chairman of Standard Chartered this week.

" A board that does not understand the strategy may not appreciate the risks, and if it does not appreciate the risks it will probably not ask the right questions to ensure the strategy is properly executed."
Justice Neville Owen in his summing up during the HIH bankruptcy case.

It's none of his business

Steve Jobs has been criticised for not being frank with his shareholders about his health. He has had one bout of cancer some years ago and the speculation is that he may be suffering a recurrence.

Any shareholder who buys Apple stock on the strength of Jobs being at the helm, must recognise that they are taking on an unusual set of risks. On the upside there is Jobs' extraordinary ability to develop new products which the world then realises that it wants extravagantly. On the downside there is the possibility, just like anyone, that he might not last out the year and the fear that he is irreplaceable.

There is no key man insurance big enough for Steve Jobs and the shareholders must accept that and not bleat about wanting to know the intimate details if he does not want to give them. You buy Apple stock for the ride and if it gets too scarey, jump off.

The hammer and the aircraft carrier

An American aircraft carrier set sail from San Diego after a re-fit with a number of fitters still working on board. Three hours out one of the fitters reported that he had lost a hammer in an area which was potentially dangerous to the ship's operation and its safety.

The Captain immediately ordered the ship back to port, where after a fairly extensive search the hammer was found.

The punishment for the fitter? To be decorated for having the guts to own up to a mistake which could have badly damaged the ship. A good example of Think Risk, Smarter Decisions.

I don't think this is apocryphal, but I can't remember the original source. Let me know if you do.

Licensed to Hug

In the months after 9/11 I had a call from Frank Furedi, the Professor of Sociology at the University of Kent. He wanted to research the reaction to 9/11 and he needed to talk to risk managers and he needed funds. I arranged for AIRMIC to provide the risk managers and Lloyd's the funds. The result was Frank's report, which went out under the sponsorship of AIRMIC and Lloyd's called "Refusing to be Terrorised". Well worth reading.

Now he has just published with Jennie Bristow, a new report "Licensed to Hug"about vetting adults who work with children . Here is a brief section from his website http://www.frankfuredi.com/ on the subject- once again Frank is dealing with the fears of society and exposing how we are in the grip of idiots:

"The alleged protective effects of a system of vetting are largely illusory. Aside from the fallibility of record-keeping and technical systems, vetting takes into account only what somebody has done in the past. The most sophisticated system in the world cannot anticipate how individuals with a clean record might behave. Thus, the CRB provides little guidance about people’s behaviour in the future. It provides the impression of security, but not the substance. It is difficult to avoid the conclusion that the national vetting scheme represents an exercise in impression management rather than offering effective protection. Vetting measures also fuel suspicion about adults. In that sense, they are not just harmless rituals, but negatively influence the conduct of adult-child relationships.

Although proponents of the scheme contend that it is designed to prevent “worst-case scenarios”, the very institutionalisation of the scheme encourages worst-case-scenario assumptions to become the norm. One consequence of this process is that adults feel increasingly nervous around children, unwilling and unable to exercise their authority and play a positive role in children’s lives. Such intergenerational unease has not made children safer than in the past: if anything, it is creating the conditions for greater harm, as adults lose the nerve and will to look out for any child who is not their own. Perversely, it inadvertently encourages grown-ups to avoid their responsibility for assuring the well-being of children in their community. One of the principal consequences of the vetting of grown-ups is the legitimisation of the idea that it is not the responsibility of the older generation to take a direct interest in the lives of children. "

Click here to read the AIRMIC Press Release from 17th June 2002...

Identity trashing

There is a lot of concern about identity theft. The BBC often reports on the sort of defensive procedures you need to adopt and credit cards providers offer to protect you in event of a loss.

There is far less concern about identity trashing on the internet, but a thoughtful piece in the weekend Financial Times by Christopher Caldwell sets out the risks of having your reputation damaged online.

First the internet is a very unforgiving medium. You get trashed on it once and it remains forever, regardless of what you do in the meantime. (Not completely new, of course, there is the story of the nobleman who broke wind when bowing to Elizabeth 1st and when he returned to court twenty years later the Queen said, " You are welcome ,my lord, we have quite forgot about the fart.")

Secondly a search will be able to find malevolent material and this could affect personal, business and employment relationships.

Thirdly there is far more protection for intellectual property than for privacy, especially in the USA, where it is hard to get redress.

Fourthly, the barrier to managing huge amounts of data on people has now been overcome by computing power and therefore people could be open to greater personal surveillance than ever before.

Caldwell points out the importance of the low evaluation by the public of these risks, "Privacy is the realm in which personal convictions ripen into public engagements - no privacy, no democracy. To judge from the amount of information shared online people are not yet terribly worried about privacy. That is another way of saying that they are not terribly worried about liberty."

David Davis who resigned his Parliamentary seat this week over the obtrusiveness of the State in survelliance matters and its assault on human rights in the name of security is tilting at an important windmill.

Zen and the Art of Risk Management

I have Geoff Tudor of the FUJI Club in Tokyo to thank for the following quotes, where he got them from I am not sure., they were entitled "Important Zen Teachings." I have selected the ones that relate to risk for your enlightenment.

"Never test the depth of the water with both feet."

"If at first you don't succeed, bomb disposal is probably not for you."

Think risk, smarter acquisitions

For any company contemplating an acquisition the following reality check from Justice Neville Owen is very pertinent.


"A Board which does not understand the strategy may not appreciate the risks, and if it does not appreciate the risks it will probably not ask the right questions to ensure the strategy is properly executed."

For two Boards contemplating a merger it is probably a deal breaker.

Growler

Nigel Lucas, the Chairman of Risk Publishing Online, was an officer in the merchant marine years ago and tells me that , contrary to landlubbers' belief that all icebergs are 10% above the waterline there is another type which is totally submerged. This is called by sailors a " growler" presumably from the noise the hull makes on contact.

In risk management terms you either need sophisticated sonic detectors to pick it up or a look out on the prow of the ship.

Whatever the detection method "growler" is a great name for risks which you cannot identify until almost on top of them, but which lurk just under the radar! The people best able to detect them are at the sharp end of the business.

Off the record

The National Archive at Kew , guardian amongst other things of the Domesday Book, has a deserved reputation for protecting the national records. It has tight control on all access to its material as theft is one of the major risks it faces.

What has recently come to light, aired on a BBC radio show, is that someone has been adding material to the archive without permission, creating false records which have then been used, it is thought, to support sensationalist claims in books relating to World War 2 events. Over 20 false records have been identified and new controls are now in place to stop this happening again.

Once there is doubt about the records then the damage to the reputation of the National Archive is very signficant because researchers do not know whether the document they are quoting is authentic or not.

The Fantods of Risk: Essays on Risk Management

The Fantods of Risk: Essays on Risk Management
By H.Felix Kloman, published by Xlibris. Available from http://www.xlibris.com/ or Amazon http://www.amazon.com/ for $20

Roger Miller,a previous Executive Director of AIRMIC and no slouch with the apposite phrase, once described Felix Kloman to me as having a“luminous mind”.

The range and reading of that mind are on display in Kloman’s latest collection of essays on risk management,esoterically entitled “the Fantods of Risk”. Fantods are either a state of extreme nervousness(the fidgets) or a sudden outpouring of rage ( a fit).

Kloman ,I guess, is more likely to take to his keyboard in a fit ,one perhaps brought on by extreme nervousness as he contemplates the risks facing us and our general incomprehension. He has the seriousness of an Old Testament Prophet, laying down the law ( he likes lists),citing other scriptures including the saintly Peter Bernstein and the blessed John Adams, both known to members for their presentations at the AIRMIC Conference. Kloman is remarkable amongst the IRM membership for being struck dumb when giving their Lecture, an event which he describes in the book, graciously thanking the crisis management of the IRM and the hosts Willis.

He has read very widely and across many disciplines. He is one of the few writers on Risk Management from an insurance background who has become an active member of GARP, the Global Association of Risk Professionals, the financial risk managers who have recently been weighed in the balances and found wanting in their knowledge of risk. He chastises the improvident and the impertinent- including AIRMIC on two occasions in this book for the Partnership agreements which Kloman considers an outrageous conflict of interest – I disagree with him, but I can see why he might get a touch of the fantods when considering the situation from Maine or Connecticut, where he is in residence.

We need more prophets like Kloman, more such writers and thinkers ( not always the same thing of course) and his essays are always illuminating, as Roger said he found the man. They are full of wonderful insights, irritations, the odd haiku, a dash of Monty Python and serious analysis . He makes the study of risk an essential and central activity ,not some obscure calling. He has striven mightily to have the word “risk” accepted as having an upside as well as a downside. It makes you realise that if you look hard enough, within a prophet you may often find a poet.


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Accidents and Options

Imagine you are the owner of a company and you have an important guest on your premises. Naturally you supervise all the arrangements to ensure that everything is managed well and any risks to your guest are controlled with great care.

However, despite all your best efforts and those of your staff a terrible accident befalls the guest. You then discover that one of your staff was not fit for duty and his errors and your decisions have contributed to the accident.

Do you

1.accept that the fault lies with the decisions made by you and the culture of the company which you have set up and recognise that the guest's family may believe you culpably negligent and the authorites think that there is a corporate manslaughter case to answer with a very clear guiding mind( you) identified?

or
2. claim it was someone else's fault and cover up any traces of the unsuitability of your staff for having care of the guest?

If you chose 1. you run the risk of being prosecuted and sent to gaol , paying out huge damages and possibly losing your licence to run the business if it is one where the general public are involved.

If you chose 2. you should vigorously pursue other parties as being the cause of the accident and you may, even though your claims might be conclusively proved to be false, get away with deflecting the criticism of your organisation and your decisions

The authorities should make sure that 2 is not an option, at present it seems it is.