209. What is risk management
Key insights
🌍 Risk management is essential for corporations to attract financing, talent, and satisfy regulators and external stakeholders in the 21st century.
🔍 Risk management two involves the application of tools and techniques from the field of probability to effectively manage risks.
🧠 The purpose of risk management is to significantly improve the quality of decisions that are material to the achievement of a corporation's objectives.
📊 Applying quantitative risk analysis can make a significant difference in insurance decisions, surpassing the impact of following best practices and recommendations by brokers.
🤔 The speaker emphasizes the importance of risk management by stating that it made a "huge difference" to the result, indicating its effectiveness in achieving positive outcomes.
⏰ As a corporate risk manager, it is essential to balance both aspects of risk management, allocating as little time as possible to ensure efficiency.
🧮 Risk managers may need to do calculations themselves or provide tools and techniques from probability theory, decision science, and neuroscience to support the team in making informed decisions.
The key idea of the video is that risk management involves implementing policies, frameworks, and tools to assess and mitigate potential risks, and it can significantly impact business decisions and outcomes.
00:00 Risk management is a term used to describe two separate approaches: one is an element of corporate governance, and the other involves certain rules and procedures to attract financing, talent, and satisfy regulators and stakeholders.
01:56 Risk management involves implementing policies, frameworks, and tools to assess and mitigate potential risks.
02:22 Apply decision science, behavioral economics, and neuroscience to make informed business decisions regarding technology, alternatives, budgeting, deals, transactions, and contracts.
02:48 Risk management involves pausing before making a decision, applying techniques from probability theory, decision science, and neuroscience to improve the quality of the decision when there is uncertainty and it is important to the corporation's objectives.
03:21 Applying quantitative risk analysis to insurance decisions can significantly impact the type of insurance purchased, highlighting the importance of calculating the underlying risk profile.
03:50 Saving over $10 million in a year made a significant impact on the outcome.
04:01 Risk management involves managing both a risk management fund and the overall risk of a corporation, requiring the corporate risk manager to balance both responsibilities.
04:22 Risk management involves supporting important business decisions by applying techniques and tools from probability theory, decision science, and neuroscience, which can include doing calculations oneself or creating a culture and processes for the business to do risk analysis.
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