Preparing for the Unexpected The Failure of Risk Management: Why It's Broken and How to Fix It
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Sep 14, 2023 Douglas Hubbard, author of 'The Failure of Risk Management: Why It's Broken and How to Fix it,' discusses the challenge with Risk Assessments, problems with the traditional risk matrix, analysis placebo, using information incorrectly, risk and impact, risk neutrality, value statistical life, and tips to improve current risk practices.
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Risk Matrix Origin
- Risk matrices originated from a simplified criticality matrix in the oil and gas industry.
- Consulting firms adopted and popularized them without validating their effectiveness.
Analysis Placebo
- Structured procedures don't guarantee better decisions; there's an "analysis placebo" effect.
- Confidence increases after adopting a new method, even if performance doesn't improve.
Calibrate Experts
- Train subject matter experts to express knowledge probabilistically.
- Use calibrated estimates instead of qualitative scores.