Monday, August 11, 2008

Confessions of a risk manager

Those of us who are involved in jobs that require us to advice, counsel or analyse have stories to tell about how the senior management, directors, clients or principals trivialise our input, mock our input or, outright shut us up - as if we are bearer of bad news when, all we are trying to do is to warn these people against being so gung-ho about certain investments or committing so much financial resources or, committing so much borrowings into certain projects or schemes.
How often has it been for you that the rah-rah cheerleading guys in the Marketing and Sales Department prevail over your caution and reticence?
Well, these days it almost feels like the old summer movie of the 1980s, The Revenge of the Nerds!!! Look at how the nerdy accountants red-flagged Oilcorp and Axis? And, looking at the Bank International Indonesia acquisition mess that Maybank has gotten itself into, you wonder how many stories the guys involved in giving risk advice for the deal can tell us.
For those of you who nod your heads as you read this, you will find the article in The Economist very resonant and relevant. For the rest of you, read it for the warning and moral that underlines it. It's the view of a risk manager in an unnamed investment bank that has exposure to the subprime fiasco that has yet to run its full course in the US.
It speaks of a situation that management consultants call groupthink, a phenomenon where particpants in a meeting are overwhelmed by a dominant person or clique. Participants are transformed from individuals into a bovine herd, what Malaysians call a pak turut syndrome, where indolence takes over as described by James Bryce.
This is an interesting morality tale. By the way, it applies with equal force to all the sycophantic political followers who adore their respective leaders and, are prepared to follow them like lemmings (a furry mammal in Europe) rushing over the precipice. Read the article here.
But, to be fair to the cute lemmings, read about the myth of lemming suicide (the metaphor that I used above) and the debunking of that myth here. Anyway, you get the picture, I hope.

No comments: