The Failure of Risk Management, 2nd Edition

CHAPTER 1Healthy Skepticism for Risk Management

It is far better to grasp the universe as it really is than to persist in delusion, however satisfying and reassuring.

—CARL SAGAN

Everything's fine today, that is our illusion.

—VOLTAIRE

What is your single biggest risk? How do you know? These are critical questions for any organization regardless of industry, size, structure, environment, political pressures, or changes in technology. Any attempt to manage risk in these organizations should involve answering these questions.

We need to ask hard questions about new and rapidly growing trends in management methods, especially when those methods are meant to help direct and protect major investments and inform key public policy. The application of healthy skepticism to risk management methods was long past due when I wrote the first edition of this book more than a decade ago.

The first edition of this book came out on the tail end of the Great Recession in 2008 and 2009. Since then, several major events have resulted in extraordinary losses both financially and in terms of human health and safety. Here are just a few:

• Deepwater Horizon offshore oil spill (2010)
• Fukushima Daiichi nuclear disaster (2011)
• Flint Michigan water system contamination (starting 2012)
• Samsung Galaxy Note 7 battery failures (2016)
• Multiple large data breaches (Equifax, Anthem, Target, etc.)
• Amtrak derailments/collisions (2018)

Events such as these and other natural, geopolitical, technological, and financial ...