(47br) Can Black Swans be Red Herrings?

At present, our industry faces its biggest challenges due to mismanaged risks and the need to be sustainable. Over a period of time, along with the experience of various major accident events, risk management philosophies and techniques have become more sophisticated. However, there still remains much opportunity to extract better value from risk management activities and investments. This presentation will discuss some of the current weaknesses and highlight specific opportunities for improvement. It is intended to provoke change in how we look at existing risk management processes.

Specific topics will include:

• The potential for “black swan” events is a fallacy. Rather, they are a failing of threat identification, risk assessment and/or mitigation investment decisions.
• Rather than truly exploring the specific causes that might be applicable in that special situation, many threat identification exercises are content with simply listing the generic causes of potential failures.  
• Current technology and thinking could enable much more value to be extracted from expensive hazard identification activities that have not evolved since their inception in the 1960s.
• Many risk metrics do not have a practical intrinsic meaning. There is a need to monetize risk metrics so that their intrinsic meaning can be better understood and they can be better related to risk mitigation investments.
• Historically, much risk management effort has gone into demonstrating that the status quo is OK. We need to truly embrace the concept of continuous improvement and focus risk management activities on helping to determine where we can make our best risk mitigation investments.

This will improve our business.