April 16, 2012 by
Filed under: Risk Management
In risk management terms, this is a situation where the risks were either not recognized, or the controls didn't work, or weren't effective enough. Well, it certainly wasn't a black swan that brought the Titanic down; the risk of the iceberg was well known. Also, the controls were perfect and were working fine. It was the best ship ever crafted, and still it was struck by tragedy. What happened in risk management terms? The Titanic case is a clear example that shows risk management is not a paper and static exercise; it needs to be treated dynamically. A combination of carelessness caused by the idea of invincibility, of slow reactions, not using the 'controls' at the right time, and many small decisions, caused the disaster to happen. This clearly shows it is very important to have a risk management framework, to perform risk assessments and to test the effectiveness of controls, but the proof of the pudding is in the eating. You need to test how people react in crisis situations, train them and keep everyone on their toes. Create a control in your risk management framework that forces these tests. Risk management is not a job behind a desk.