A System Approach to Risk Management
Managing enterprise risks in the information age requires attention and diligence to a rapidly changing landscape of potential hazards. The speed of information sharing in the interconnected internet era means that responding to hazards must also be rapid and effective. Bad information can remain on the internet for a long time.
Knowledge depends on theory. Information is not knowledge. Experience teaches nothing without theory. Practice makes permanent, not perfect. Copying examples does not lead to knowledge.
Leaders must understand human behavior to motivate, coordinate and manage people to optimize the system.
A leader must understand the system he or she is attempting to manage. Without this understanding the system can not be managed or improved. A system cannot understand itself or manage itself. Optimization of the parts does not optimize the whole. System optimization requires coordination and cooperation of the parts which requires leadership.
Refers to Shewhart’s concept of common or system causes of variation and outside assignable or special causes of variation. Relates to the Red Bead experiment and blaming people for variation caused by the system.