While this article, by Christine Davis in The Cutter Edge, deals with constraints to risk management, it applies equally well to value management. With my total focus on value, I view risk as one of the factors – a major one – that can significantly impact the creation and sustainment of value and all too often, erode or destroy it.
The article is well worth reading – the only omission is the failure to identify analysts as one of the causes, if not the major cause of short-term thinking. I had hoped when they so dramatically misread and misled the dot.com boom, and subsequent bust, that their credibility would have been irreparably damaged but, apparently, not so. We will continue to do stupid things, as a result of fear, greed and blind hope, when driven by people who are big on theory, and enamored with computer models, but low on real-world experience or even basic common sense. The result will continue to be that, rather than creating or sustaining value, we will erode or destroy it.
Until executives and upper management truly lead, within the context of an effective enterprise governance, based on a strong value system decisions will continue to be made
To slightly paraphrase Christine’s last paragraph: “As Albert Einstein said, ‘Three great forces rule the world: stupidity, fear, and greed.’ When it comes to both value management, and risk management, we have all of these forces coming together in a very ugly way, with even more ugly consequences.”