Reads

The Failure of Risk Management- Douglas W. Hubbard

posted Sep 15, 2011, 5:44 PM by Pankaj Rathi   [ updated Sep 15, 2011, 6:19 PM ]

The Failure of Risk Management: Why It's Broken and How to Fix Ithttp://www.amazon.com/Failure-Risk-Management-Why-Broken/dp/0470387955

In addition to the Amazon link above the http://howtofixriskmgt.com/ website has more material and files with illustrations.

I came across this book while researching Monte Carlo methods and their applications. Risk management, obviously, has many applications. My interest in this book was two fold, first to learn how quantitative techniques are applied to risk management and the implementation of Monte Carlo methods. Initially I was thinking about only financial risk management and applying these techniques to my personal portfolio. But, the book has exceeded my expectation since the methods presented are generic with applications in every type of risk management. I am able to set-up models for manufacturing demand, shipping schedules, failure analysis and rethinking the risk management for the product at work. I need to clarify that, I did not achieve all of this solely from this book. The book has certainly provided direction. I have not explored the website yet.

The author strongly advocates quantitative methods for risk management instead of qualitative 'scoring' methods. He chastises qualitative methods in every chapter and may be that is necessary to emphasize his point. At times, the book is repetitive in stating the importance of the quantitative methods for risk management and calibration of the experts required to implement these methods efficiently. The book is relatively easy to read due to the presentation of the ideas in non-quantitative manner. It does not go into technical details of setting up the Monte Carlo methods. 

Overall, I recommend this book for those who want to explore alternatives to the popular 'scoring' methods of risk management.

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