How to Manage Risk (After Risk Management Has Failed) Harvard Case Solution & Analysis

Over the past decade, and especially over the last few years, the number of the most respected companies in the world collapsed. The authors believe that the main, though not often mentioned, these companies factor of the traditional approach to risk management, which tends to look at risk in all the wrong places. Two fundamentally different views have evolved over the years about how risk should be assessed. The first and the prevailing view - called the frequency of view - based solely on repeated historical data, such as weather conditions. The second, or Bayesian, view considers the risk to be part of the decision of the observer, or the property of the process of observation repeated historical data, thus substantially supplemented by other types of information. Where there is a lot of relevant data, this information plays a dominant role in the integration of the decision to make a significant improvement over the traditional approach. Where there is little or no relevant data, the solution plays a dominant role in providing value in terms beyond the traditional approach. In any case, recognizing the important, and sometimes the central role of the court can lead to more reasonable and realistic behavior - in large part, because we understand that the court is not perfect and may be revised as experience is gained. The key point is that the risk of a Bayesian approach can be measured quantitatively, regardless of the quantity and quality of data. And rather than focusing solely on the observable world, Bayesian risk assessment also reflects the consistency, reliability and accuracy of the observer. Many of the measures that are deployed to recover from falls and build a more robust system that prevents future crises. - Switch on the frequency of risk management for the Bayesian risk management should be part of this effort, "Hide
by Adam Borison, Gregory Hamm Source: MIT Sloan Management Review 9 pages. Publication Date: 01 Oct 2010. Prod. #: SMR364-PDF-ENG

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