Principles of Effective Risk Management

Abstract

Chapter 11 argued for an approach that placed risk management in service of a specific goal in the development of strategy: outcome assessment. This recommendation stems from two of the dominant lessons of the financial crisis: that the concept of risk had become fragmented and incoherent; and that many of the most common cognitive and framing errors push decision-makers toward urgent, nonconsequentialist thinking. Developing a single coherent approach to risk, and focusing risk analysis on outcomes, are the first steps toward the effective employment of risk as a component of a larger strategy process.