Enterprise Risk Management

CHAPTER 2A Brief History of Risk Management

H. FELIX KLOMAN

President, Seawrack Press Inc.

INTRODUCTION

What is risk management (and its alternative title “enterprise risk management”)? When and where did we begin applying its precepts? Who were the first to use it? This is a brief and highly personal study of this discipline’s past and present. It is a description of some of its emotional and intellectual roots. It spans the millennia of human history and concludes with a detailed list of contributions in the past century.

RISK MANAGEMENT IN ANTIQUITY

Making good decisions in the face of uncertainty and risk probably began during the earliest human existence. Evolution favored those human creatures able to use their experience and minds to reduce the uncertainty of food, warmth, and protection. Homo sapiens survived by developing “an expression of an instinctive and constant drive for defense of an organism against the risks that are part of the uncertainty of existence.”¹ This “genetic expression” can be construed as the beginning of risk management, a discipline for dealing with uncertainty.

As the millennia passed, our species developed other mechanisms for coping with each day’s constant surprises. We invented a pantheon of divine creatures to blame for misfortune, praise for good luck, and to whom we offered sacrifices to mitigate the worst. These gods and goddesses, the personification of heavenly bodies, high mountains, and the deepest seas, led to a dependence on human ...