ten rules for managing risk

1. redamber consulting
redamber consulting
‘removing uncertainty’
‘removing uncertainty’
My Ten Rules for Managing Risk
Mike Walker FIRM FRICS
Registered Risk Practitioner
19th February 2010
mike@redamberconsulting.com www. redamberconsulting.tel

2. redamber consulting
‘removing uncertainty’
I have used these rules for nearly ten years and have
found them invaluable for reminding me of what to do
(and what not to do) in terms of simple risk management.
I hope you find them useful.
Mike Walker
www. redamberconsulting.tel

3. redamber consulting
‘removing uncertainty’
Rule 1
Remember there is no return without risk.
• just as there is (or should always be) a risk
premium for transferring a risk
• then there also needs to be a return for taking
a risk
• there should be a reward for taking risk
www. redamberconsulting.tel

4. redamber consulting
‘removing uncertainty’
Rule 2
Be transparent
• ie. be open and honest in what you do
• maintain a trail that is easily followed
• try to have a full understanding
• be clear in how risk is/is to be treated
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5. redamber consulting
‘removing uncertainty’
Rule 3
Seek experience
•go to those who have done it before
•or if this is not possible, remember that
practice makes perfect!
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6. redamber consulting
‘removing uncertainty’
Rule 4
Know what you don’t know
• what is it you have assumed?
• remember you cannot know everything
• risk models have assumptions and gaps
• what has been excluded?
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7. redamber consulting
‘removing uncertainty’
Rule 5
Communicate
• tell people what steps you are taking
• don’t live in a silo
• it is good to talk
• report your risks
• talk about risk, raise awareness
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8. redamber consulting
‘removing uncertainty’
Rule 6
Diversify
• spread the risks around
• do not have one risk dominating all
• don’t put all your eggs in one basket!
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9. redamber consulting
‘removing uncertainty’
Rule 7
Show discipline
• Have a regime and stick to it
• adopt a consistent and structured approach
• steer a constant course
• this is much better than keep on changing
your mind over what to do.
www. redamberconsulting.tel

10. redamber consulting
‘removing uncertainty’
Rule 8
Use common sense
• think about the answer you get from any risk
model
• do not analyse things to death
• it is better to be approximately right than
precisely wrong!
www. redamberconsulting.tel

11. redamber consulting
‘removing uncertainty’
Rule 9
Measure the risk (return is only half of the equation)
• what are the downsides as well as the
upsides
• how much risk are you taking for the reward?
• is the return worth the risk?
www. redamberconsulting.tel

12. redamber consulting
‘removing uncertainty’
Rule 10
Don’t transfer a risk unless you are sure
• only transfer a risk to someone who has better
means of controlling it
• or who understands the risk, and has made
competent and adequate provision
www. redamberconsulting.tel

13. redamber consulting
‘removing uncertainty’
FOR FURTHER INFORMATION
Contact:
Mike Walker FIRM FRICS Registered Risk Practitioner
Principal of Consulting Service: RedAmber Consulting
Mobile no: +44 (0)7980 327672
www. redamberconsulting.tel