Customer Reviews

Risk Intelligence: Learning to Manage What We Don't Know

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Very disappointed in this book. First of all, if you're looking for anything that quantitatively explains risk identification or management look elsewhere. Second, I found most of what the book refers to as risk identification to be completely lacking in academic rigor. Most of his assertions about how to identify your risk intelligence or your ability to rank projects in terms of risk profiling completely subjective. Lastly, if you're working at a small company this book is not for you. In my opinion if this book was written for anyone it was for someone who is juggling multiple projects in the context of a much larger organization.

Waste of time.

Risk management is a vital function for most rationally managed organizations. Any competent business plan or project proposal will include a section on risk mitigation. So what is risk? In essence it is anything that will hinder or prevent an organization from achieving its goals or purpose. Clearly then it is in an organization's interest to reduce the probability that a risk will occur through what is called `risk mitigation'. There are numerous methodologies to achieve this some good others more problematic. Yet effective risk mitigation can mean the difference between profit or loss and success or failure. It is far from a trivial matter.

Which brings us to this rather provocatively titled book, "Risk Intelligence", that provides a unique contribution to risk mitigation. Although Apgar does not say so, he uses the term `intelligence' in both its meanings namely, cognitive ability and processed information. He usefully divides risk into two categories `learnable' and `random' by which he means risks whose probable occurrence can be assessed and risks that may be equally probable but that cannot be assessed accurately. Apgar believes that a number of factors, such as previous experiences, can combine to enable individuals and organizations to understand some risks better than others and that for them such risks are what he calls learnable. He correctly notes that if a specific risk is understood it cannot be predicted, but its probability can be assessed. Such risk `knowledge' can give an organization a competitive edge in most situations. As with so many things once somebody actually thinks them up, the concept of `risk intelligence' seems obvious. But Apgar is to be congratulated for first articulating and explaining such a useful idea.

Of course, `risk intelligence' is not the only factor in risk mitigation. Apgar would no doubt be the first to point out that other factors such as reserve capacities, process flexibility, and realistic alternatives provide the resiliency essential to successful risk management.

This is a "must-read" book. It's a category starter. It's full of innovative ideas. It's entertainingly written, and it has great case studies. The category the book starts is the category of risk intelligence, in the sense of one's capability to learn about the risks one will face in an area of endeavor and so cope with and reduce them. In the past, risk intellgence hasn't really referred to intelligence in the sense of the capability to learn about risks. Instead, it's been about a category of business intelligence, which generally refers to information of better quality than ordinary information. So this slight shift in orientation opens up an entirely new and important field, one that can emphasize anew the practical importance of the capacity for organizations and people to learn.

This book also provides innovative ideas in every Chapter. In Chapter 1 the idea of relative risk intelligence, or the gap between self and others in ability to learn about risk, is introduced and we are given a set of four myths about risks, and four accompanying rules countering the myths. The distinction between random and learnable risks is also introduced, and definitions of risk and risk intelligence are provided. With this as background, Chapter 2 then discusses the difference between random and learnable risks in order to help readers learn how to distinguish them, and expands a bit on the idea of relative risk intelligence. The chapter ends by emphasizing the need for a way of comparatively scoring risk intelligence. Chapter 3, the pivotal chapter of the book, then immediately turns to filling that need. It offers a method of measuring one's relative "Risk IQ" through a simple test based on five elements focusing on experiences in the risk area in question. The five elements of the test focus on the frequency, relevance, impact, unexpectedness, and diversity of one's experiences, and on the extent to which one is methodical about tracking what one learns. Someone doing the assessment compares organizations, or other actors, on each of the five elements using a simple scaling method. The scores on each element are then summed to get the relative risk IQ score. The score is then used to triage risks, diagnose one's risk intelligence, and classify oneself or one's organization as a risk assessor. The chapter then illustrates classification by using the At & T case, while introducing three patterns of risk assessor: encyclopedists, impressionists, and amnesiacs. The chapter then uses these patterns to develop some ideas about the life cycle of risk assessment skills in organizations, how teams can be used to enhance risk intelligence, how risk intelligence scores value information (involving use of a Bayesian approach), and about relevance as the missing link between information and learning.

Having offered a basic tool to assess risk intelligence, in Chapter 4, the book turns to risk strategy auditing, risk strategy, and "pipelines of learning challenges." The idea of the learning pipeline is critical idea that addresses us to the importance of sequencing risks. It's not just the risk portfolio that's important in risk strategy. Chapter 4 argues persuasively that "the pipeline in the portfolio" is just as important as the portfolio itself and that the sequencing of risk is just as important in risk strategy as the diversification of risk. The chapter also offers us tools to assess and formulate risk strategy. These include the risk strategy matrix, the risk strategy audit tool, and a guide to who should conduct risk strategy audits in organizations. The chapter also shows how risk strategy audits complement analyses based on the BCG's growth-share matrix, explains four key risk strategy patterns: winter, spring, summer, and fall strategies, and relates the life cycle of risk to business cycles. Chapter 5 focuses on how important it is to to join with partners to manage one's risks. Tools offered in the chapter include risk-role matrices and risk role measures. Roles such as "customer umbrella," "classic borrowers," "shock absorbers," and risk distributors are discussed, among others. The discussion then turns again to random risks and to emphasize that when risks are random, no one has an inherent advantage, re-labels them "flat-field" risks, and uses the Mexico debt case study to show how creating flat-field risks can be a good thing. The chapter ends by exploring the idea of risk ecology and its relation to open market economies. Chapter 6 provides a great ending to the Book by summarizing its analysis and advice in 10 steps "that distill the implications of the story of risk intelligence." While you're reading the book, relatively short as it is, one tends to lose track of the number of new ideas and tools it presents. But Chapter 6 is the perfect antidote to diffusion. Its effect is to coalesce the book's impact for you and to bring home the importance of its innovations.

In the category of "entertainingly written," the book's frequent anecdotes enhance the presentation. A typical example begins this way: ". . . suppose blue smoke starts to billow from under the hood of your car any time you drive over 60 mph. You also notice, for the first time, a mysterious green liquid collect under your car when it's parked. So you call the guys at Car Talk . . . " In the category of case studies the book covers cases like Toyota, Tokyo's Tsukiji Fish Market, the Boeing - Airbus rivalry over stretch jumbo jets, the Nokia - Ericsson competition in mobile phone manufacturing, and AT & T's growth decisions in the years prior to its merger with SBC -- principles in every chapter are illustrated with important cases.

No book is perfect, and this one does have some problems in the areas of conceptualizing risk intelligence, the risk intelligence test, and also in its scaling methodology. But these problems hardly weigh at all against the fact that if you're interested in risk intelligence as a category, you really need to read this book.

This is a fantastic book with powerful insight about the failing of portfolio theory when it comes to understanding and managing business risks. Apgar offers wonderful examples to illustrate how business risks are actually learnable and he creates a framework for preparing yourself to be good at learning about and mitigating risk.

This would be a very good book for seminars on risk management at the college level or in exec education programs at corporations.

Written by David Apgar, a managing director of the Corporate Executive Board best-practices research organization which serves senior executives at over 2,500 institutions worldwide, Risk Intelligence: Learning To Manage What We Don't Know openly challenges the common presumption that risk management and related business judgments is a matter solely for technical specialists. Risk Intelligence teaches the reader how to distinguish learnable risks from random risks in business decisions, how to score one's own risk intelligence, how to conduct a solid risk strategy audit, how to build networks that can adapt dynamically to risk, and much more. Written in plain terms with clear examples, Risk Intelligence is enthusiastically recommended for business leaders seeking to sharpen their flexibility and adaptability when confronting unknown threats.

At work, I am doing software development planning. So I need a clear understanding of Risk Intelligence. So I bought this book.

The writer's argument is that all risk falls into two categories one is what is knowable and therefore can be learned, and the other unknowable so difficult to prepare. So what you should do is your projects as you learn!

As I went on, reading this book. I found it full of current examples that are at best dubious to prove his point. For example the US planners' miscalculation in Saddam's Iraq was not the WMD, but later in trying to create a secular democracy in a post-Saddam Iraq and underestimating the Muslim fundamentalist response. Nor were the Japanese clever planners so more advanced in alternatives to oil that gave them an advantage when the oil crunch occurred. It was because Japanese are generally smaller than Americans, so their cars are smaller. When the oil crunch occurred, they were already making smaller so more fuel efficient cars and during the crisis they kept making them. Another example quoted is the 2004 Indian Ocean tsunami. If as the writer states the US had warned the Indians in time, it would have made little difference as the public, the police, the coastguard and the military in India had no procedures to act on this information. I was there and saw in India the local authorities had no idea of what to do. This became an important discussion in India after the event which the writer should have read up about before quoting it in his book.

I was willing to put all of this aside. I know my market and I know its competition so I wanted to see what this book could help me in my risk intelligence. I found little.

I kept thinking what is unknowable often occurs in the project that we think we know. This doubt is the nature of life.

At the end I went though the step-by-step format hoping to get something. But I found it wanting. I know my market, I know my competition knows the market. Say something they know a little better then us. Does that give me a 1 or 2 to them? I do not know from reading the book.

Also many reasons go into assigning projects for example resources, the companies current needs, the clients needs etc. Risk analysis is one of many. I cannot order the projects as he suggests.

It maybe a good book for a university course but it needs much work and less politics before a manager like me can get some value out of it.

Apgar's focus on learnable risks offers some very useful frameworks for applying risk management concepts to a real-word competitive business environment.