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Risk Management in times of crisis

August 16, 2012 by
Filed under: General, Risk Management

We are in crisis. Are we in crisis? It's all a matter of perspective, I guess. For some, it definitely is a time of crisis. When you lose your job, your salary drops, taxes increase, your home cannot be sold without vastly reducing the price, then it clearly is a crisis. Luckily for many people, this is not reality, but a potential perspective. Traditional and social media help to communicate this potential perspective. So, although the reality of many people isn't all that bad, they fear the potential.

Interestingly, the potential was also there ten years ago, when there was no crisis. People did lose their jobs, companies did go bankrupt, but somehow this wasn't seen as a crisis. It is fair to say that in good times risks are underestimated, and probably overstated in times of crisis. When you think of it, this implies that risk management is more important in good economic times. When you have kids, you know that you need to watch the dare-devil kid a bit more than the careful one. Same in risk management, in times of crisis many are cautious.

This now leads to an interesting conclusion. Often, risk managers are seen as the NO-people: preventing bad things from happening, saying no to too risky investments and actions. In these times, risk managers should do exactly the opposite: they should help business to put risks into perspective and help making decisions. Risk managers should maybe be like a pendulum swinging exactly opposite to the market sentiments. More about Risk Management.

Tags: Risk, Risk Management, Enteprise Risk Management

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