Customer Reviews

Elimination of Risk in Systems: Practical Principles for Eliminating and Reducing Risk in Complex Systems

5 star:		(1)
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Albert Einstein once wrote that you should never despise simple books.

This is certainly an example of a simple book, about the ideas and principles behind risk, which the author explains thoroughly. It is full of insights too, and will probably never go out of date. It gives you a clear understanding of risk in any context, financial or otherwise.

A new, easy to understand risk measure, the author's invention, is central to the book. He uses it effectively to explain the well known but hard to understand standard deviation measure of risk. He also uses it to derive a new version of the risk equation that makes risk elimination and reduction possibilities almost obvious. The original risk equation, over which the author's version is a clear improvement, was first proposed by William Sharpe.

But be warned. This is a book for ideas people only. The author is clearly only interested in principles. (The front cover does state that the book is about practical principles, and means it.) All of the author's examples, many of them almost trivial, are geared to getting the reader to understand a unified set of principles represented by a few basic equations. Nowhere will you find a detailed method for carrying out some specific complex operation, either in finance or everyday systems. The author obviously assumes that if you have understood the principles, you will be able to figure out what to do in any situation, even an entirely new one.

Some people are not very comfortable with ideas, concepts and principles, however, especially application of principles to new situations. They are more comfortable dealing with complex specifics and standard procedures. Such readers may react negatively to this book, since it lacks specific information about any specific situation. With that caveat, I rate it five stars. I found one obvious typographic error near the end, inside an arithmetic expression that came out right.