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Death, for example, is socially disruptive, because it not only removes an individual member from the fabric of society, which potentially creates tension, it is also stressful for those with close emotional ties to the deceased, who may not be able to function efficiently for a period of time.
Religion deals with the problem of death through both belief and ritual: a belief in the afterlife (common in many cultures) denies the fact of death and comforts the bereaved, while the funeral ceremony offers a chance for other members of society to comfort the bereaved with their physical presence and it may also act as a form of catharsis.
The funeral is effectively an expression of social solidarity which serves to reintegrate society following the ‘stress’ caused by a loss of one its members.
Rituals In Death

We had some rites for Grandmother yesterday. I was impressed how smooth the team operated.

The team of priests and musicians were old and they worked efficiently, taking and handing over when the situation fit. There was an assistant to the priest who seemed to require reminders by the team. The musicians, alert, came to his aid by mouthing instructions or gesturing. Set up and removal of the altar tables appeared seamless in their construction and take down. I would not be familiar with the details of their job (the chanting and the rituals). I could see this was a stable team with the leader being the one who supplemented directions (slightly annoyed tone) to the team where required. They were so smooth in their procedures I felt reminded of my job. This is what established departments look like. There is seamless handling by every member of the team. Where there are new staff, the rest of the members sprang into action to advice the new staff, to socialise what needs to be done.

When teams have an elevated number of new persons who need socialising, the resources and effort spent in socialising them increases. It is not an easy task to socialise staff even if the staff is open and receptive. It requires a lot of conversation to calibrate the staff into the existing way the team thinks and works. The level of difficulty increases when the staff is neutral or unreceptive. (Usually, they get labelled as having an attitude problem.) If the head of the team is new, it increases the difficulty of calibration. The calibration is necessary to reduce production problems in a team. When the head of the team is new, problems get magnified. Heads are less receptive of calibration in general and they can create more chaos by issuing directives when they have not been properly calibrated. Now do I mean that everyone should be yes men and do as they are told all the time? If the issues are production driven, yes, we all need to be able to follow those instructions. If change is required, it needs to be managed.

Now I know that makes me sound bureaucratic but in an organisation, where there are processes already built to handle certain aspects of risk, change requires care. Given the fast pace change in the business circumstances, the ability to nimbly handle them requires a well settled team who is familiar with their work. In chaos, there must be order (to support growth). In order, there must be chaos (to drive growth).

On a side note, I think this blanketing of other risks as operational risk by Basel isn’t very helpful to think about risk properly.

It creates a lot of misuse in the word risk. Someone would declare the presence of risk when they mean error or impact. Language is alive and different cultures use the lingo in different ways. I am not pedantic and it’s not difficult to figure out what the meaning from context and conversation. However, I wonder if it drives the conversation and thinking differently. Being error free means less wastage – it’s a production concern. Being able to cushion impact means the ability to recover and resume operations quickly – another production concern. These production concerns are something that has everyday processes and handling to manage them. A break in controls is a production problem, ie, the operational factors. Production problems must be fixed but it is impossible for production problems to be eliminated. You could bring the number to a very small occurrence but zero is impossible. I wonder if conversations are brought awry when we talk about levels of intolerance in operational risk. It’s at most an ambition, at worse a denial.

This leads me to wonder, if this is a fuzzy concept to measure management. If so, the collection of operational risk data is something to reflects the management at the point of measurement. It can never be forward looking and looking back makes no sense if there are upheavals in management.

The origin of risk was the uncertainty of coming back alive. There is a great article on rituals as controls that I used many years ago in a workshop. (My old office let me run free like a wild child. They are fabulously good sports all the HODs.)

Malinowski found that magic was not used in lagoon fishing, where men could rely solely on their knowledge and skill. But when fishing on the open sea, Trobrianders used a great deal of magical ritual to ensure safety and increase their catch.

In the world where there is physical dangers, risk continues to be conflated with safety. In that article, it was sea fishing. Other industries that think of risk similiarly are mining, construction, armed escorting, heavily bombed or areas where they are frequent gunfires. I also notice that manufacturing plant where the materials or processing is dangerous would think of risk the same way. In these areas, risk is monitored like blood pressure readings.

The mathematics of risk was born out of gambling. It was beneficial to being able to apply knowledge to skew the chances of winning. This would apply to fields where knowledge can skew chances: baseball, football, horses and poker. It would not apply to 4D and and other lottery. The space race is another area where skills and learning skew chances of winning the race. (Astounding book on this by Deborah Cadbury is highly reccomended.) This is also the area where traders operate. A rather well known example is Nissam Taleb applying his knowledge to bet on black swans events. In these areas, risk is described as uncertainty of winning and risk is given a factor.

Where money is promised to be exchanged at the onset of an event, the stranger who shook hands on the deal could be unwilling or unable to pay. For exchanges such as a loan or the benefits of an insurance payment, the unwillingness (ie moral hazard) was eliminated with legalease. In insurance, it meant preventing payments. In loans, that meant exercising the rights to get the collateral/security. If there was no security, it was based almost entirely on the pain of being black marked or harrassed. (AAA rating dropping straight into into D, for example.) The problem of being unable to pay can be hard to figure out. More or less, the risk of default became tied to cashflow or observations of payment patterns for a person, a company, an industry or a country. For instance, your industry sunsetting, there is risk of cuts, you have lost your job, or you missed one more payments. In insurance, missing the premiums cease insurance protection. In loans, missing loan payments brings the debt collector to your door in polite legal letters.

In these traditional areas of risk, the problem that we have been dealing with can broadly be described as uncertainty and its management (ie safety, ability to win or cashflow). With the flourish of risk management, the strenous marketing of basel, GARP FRM and PRM and risk events, there is an infestation of risk workers.

Risk has invaded into every department and its name spread like a contagion.

Compliance risk, legal risk, fraud risk, technology risk, operations risk, business risk, finance risk, people risk, marketing (they were sly and named it reputational risk), tax risk, AML risk, Sanction risk. Risk when inserted in a department’s name, perfumes the original department with an aura of knowingness. Admitting ignorance and uncertainty has become the equivalent of being a sophisticated man about the world. However, these worlds are by and large, the equivalent of the lagoon fishing. If you behave as an ordinary fisherman would you would get fish. Now and then there will be holes in the net that requires mending. One mends the net and continue fishing. One does not need to be frightened and measure the width of the holes, how often the holes are made, etc. For purposes of efficiency, one would prefers noticing the small holes and getting them fixed quickly so to continue fishing activities. There will be most certainly holes as one uses the nets. As an insider working in the company, there is no uncertainty – I have (relatively) full knowledge of policies, procedures and systems. That means I have more certainty than others. An onlooker or investor would consider this a risk because there is no view. So Warren Buffet tries to mitigate the risk of holding equity by visiting the company or talking to the people in there. A minor investor has no such access or perhaps no need for such long term view. He would base his investment decisions on by comparing which company appears more desirable in terms of returns. A beautifully maintained net doesn’t mean the fishermen know how to fish. Eventually, even Basel gave up on letting a thousand flowers bloom in the measurement of operational risk.

With this infestation of risk persons, with banks appointing CROs and declaring their risk management in annual reports, uncertainty didn’t get any clearer.

This is an interesting take on controls for risk management folks by Will Smith

Tag / risk

Mature teams

The different depictions of risks