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The Failure of Risk Management: Why It's Broken and How to Fix It

3.98  ·  Rating Details ·  171 Ratings  ·  30 Reviews
The Failure of Risk Management explains which risk analysis methods work, which don't, and how to tell the difference. The Failure of Risk Management discusses topics relevant to the management of any risk including: Financial Risks, Natural Disasters, Industrial Accidents, Product Safety, Technology Risks, Project Failures, Engineering Disasters, Pandemic Viruses, Compute ...more
ebook, 304 pages
Published April 6th 2009 by Wiley (first published April 1st 2009)
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(showing 1-30)
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Mike Smith
Jul 29, 2011 Mike Smith rated it really liked it  ·  review of another edition
Shelves: non-fiction
I read this book out of professional interest. It likely won't appeal to anyone who doesn't work in the areas of risk analysis and risk management. Author Hubbard explains why, in his opinion, the most popular risk analysis methods are ineffective and may, in fact, cause more harm than they prevent. The popular methods are based on what he calls "scoring systems", assigning a score to a risk using a poorly defined scale such as 1 to 5 or "low", "medium", and "high". He gives reasonable arguments ...more
Dennis Boccippio
I had high expectations for this book after reading "How to Measure Anything", and unfortunately none of them were met. My very short review would state: were it not for those high expectations, I would have stopped reading the book about 1/3 of the way in, but based on past performance, I stuck it through to the end. That was a mistake.

The defects in Hubbard's second book are many. First and foremost, it is simply not pleasant to read. While "How to Measure" adopted a posture of helpful tutoria
...more
Roger K.
Jun 08, 2014 Roger K. rated it really liked it  ·  review of another edition
This book is a must-read for those that make, or contribute to, decisions. Just like in How to Measure Anything: Finding the Value of Intangibles in Business, Hubbard pulls no punches in describing what works - and what doesn't.

The book begins with a survey of the current state of risk management in many different fields. It is made painfully obvious that particularly in IT and project management, we are ignoring basic knowledge from fields such as actuarial science. Hubbard makes it clear that
...more
Thomas Davidson

Like the Black Swan, this book opened my eyes to the failure of risk management. My issue is that it shows why qualitative risk management fails but does not provide evidence for the accuracy of quantitative methods other then vague statements by the author that he goes back and checks his estimates. Independent studies I have found for nuclear facilities, there are surprisingly few, put in doubt even quantitative methods. That being said, enjoy the mathematics of quantitative methods but believ
...more
Denis Korsunov
Jan 20, 2017 Denis Korsunov rated it really liked it  ·  review of another edition
It's good book about techniques of risk assessment, but extra-mural conversations with ideological opponents (i.e. Taleb) is adding fatigue.
Steven Peterson
Aug 29, 2009 Steven Peterson rated it it was amazing  ·  review of another edition
This is a very handy work on risk management. Douglas Hubbard, the author, takes the “field” of risk management to task for many practitioners simply not having a clue and doing a disservice to their organizations. He emphasizes quantification and abhors the “soft” risk management practices that are all-too-common. His introductory lament sets the book’s tone (Page xi): “Unfortunately, risk management based on actual measurements of risks is not the predominant approach in most industries.” More ...more
Felipe Moreira
Sep 07, 2015 Felipe Moreira rated it really liked it  ·  review of another edition
Enfaticamente contra os chamados "scoring methods" (chamados pelo autor de "tão precisos quanto astrologia"), Hubbard afirma que só há uma única maneira de se gerenciar riscos: através da análise quantitativa. Critica severamente entidades profissionais que recomendam o que ele chama de "método comprovadamente falhos" e "piores do que inúteis" como boas práticas.

O ponto alto do livro é, sem dúvida, os insights e a desconstrução de falácias e mitos sobre a análise quantitativa de riscos (em espec
...more
Jari Pirhonen
If you are a CRO and don't want to shake your world, don't read this book. However, if you want to get a critical look to current mainstream risk analysis methods, this book is for you. The author argues that popular risk management solutions (e.g. risk matrix, heat map) are worse-than-useless, standard organizations like NIST and PMI are guilty of promoting ineffective, even harmful methods and management consultants are just making things worse.

Author promotes need to really understand probab
...more
Ozzie Gooen
Jun 12, 2013 Ozzie Gooen rated it really liked it  ·  review of another edition
I nice put-down of the existing field of Risk Management, with some details of how to fix it. On the whole though, it felt a bit like a 300 page rant against many idiots on the field, though I guess that's not much of a surprised from the book title.

I would also imagine that much of what he's saying here really applies to probability. Douglas Hubbard kind of defined risk as the "probability of bad things", so obviously there's a lot of overlap. As such many of the arguments he gives to pursue ri
...more
Roland
Dec 24, 2014 Roland rated it really liked it  ·  review of another edition
Just like How to Measure Anything, this book is a must read in my opinion for everyone involved in decision making, or working on projects.
I've been a business analyst for over 9 years now and never felt comfortable with the popular "low/medium/high" scoring of risks.
"Let's make it Amber!" - and just what does that mean?

Knowing a little probability and math doesn't hurt, but not really necessary to make sense of the book - he really goes light on that math.

More a pilosophy of approach, but pack
...more
Lani M
Dec 11, 2015 Lani M rated it really liked it  ·  review of another edition
The book showed that the most common risk management methods are deemed to fail because they heavily rely on qualitative description (the words 'less/more likely' are subjective to people) and expert opinions which are often biased and not taking relationship between risks into account.

Hence, the author argued it is consequential to apply probabilistic models such as The Monte Carlo Simulation to manage risk. The problem is you need a whole set of data.

"The most important questions of life are,
...more
Ricardo Viana Vargas
Polemic book from Douglas Hubbard that makes critics of the theory and the existing tools used for risk management. It is a book that is worth reading to get a different perspective of the problem, mainly if you like or use quantitative risk analysis like me.

Livro polêmico de Douglas Hubbard que critica toda a teoria e ferramentas existentes para o gerenciamento de riscos. Um livro que vale a pena ser lido para ter outra perspectiva do problema, principalmente se você é adepto de análises quan
...more
Sam Motes
Hubbard gives good examples why simple risk modeling techniques such as red, yellow, green rankings and others are too simple. He makes the argument that those that argue that at least they are something and better than nothing can be blatantly wrong since they give a false since of control. The last part of the book he makes the case for Monte Carlo analysis. The power of Monte Carlo and other techniques like it is the ability to look for multiple variables impacting a risk and looking for caus ...more
Daniel
Dec 18, 2015 Daniel rated it liked it  ·  review of another edition
This book is too long winded with lots of repetition. I didn't enjoy it at all as I think it is not explained well. Maybe it should be marketed as a textbook of risk analysis, because after finishing the book, I still do not understand the quantitative method of risk management, but am only given a black box in the form of an Excel worksheet to calculate risk. This is otherwise known as the Monte Carlo method. The Black Swan, and the Signal and the Noise, are much better written for the lay man.
Roy
Not quite as broad as "How to Measure Anything" but a wonderful tour through why many risk analysis approaches don't work, and an analysis approach based on discrete event simulation can make a significant difference in managing risk. Brought together many different ideas from multiple areas of study, and answered many of the questions that come from popular treatments of risk. If you are doing anything other than simulations to analyze risk, you owe it to yourself to read this book.
Jalaj Jha
Jul 21, 2016 Jalaj Jha rated it really liked it  ·  review of another edition
The book was originally planned for around 50000 words but was released as 80000 so words books due to the 2008 financial crisis, since this book could be more relevant at that time of failure of anticipating the risk. I am surprised however that there was no subsequent edition since then.

Was a good read overall. The author's another book "How to measure anything" was mentioned so many times in the book that it got into my must-read list.
Jonathanstray Stray
Good stuff. Themes:

1) most people who peddle "risk management" cannot answer the question "how do you know it works?"
2) humans have lots of psychological biases around risk perception
3) thus, quantitative and verifiable methods are the way to go
4) the US Department of Homeland Security is stupid

And further good stuff, including comments on the financial crisis any how existing risk models missed it.
Matt
Dec 16, 2010 Matt rated it it was amazing  ·  review of another edition
Great insights. There has been a raging battle for years between different camps over the "right" way to do risk analysis in fields other than insurance and finance. This book takes the quantitative risk assessment view and does a good job explaining why. Information Security professionals in particular will find this book enlightening, if not a little bit alarming.
Jim Duncan
Jun 13, 2015 Jim Duncan rated it it was amazing  ·  review of another edition
Thoughtful indictment of subjective scoring schemes that are commonly used to estimate risk. This problem is compounded by the fact that most schemes are proposed and their utility is never measured. Easy to call oneself an expert but better to measure impact and use the results to foster continual improvement in the predictive models.
Chris Stratton
The title of this book should be something like "The complicated world of probability". Risk is just the negative result of a probability. I agree with him that business should do more to measure probability. Probability of project failure, Probability of supply chain interruption. I think most people don't know where to start. Hubbard helps point the reader in the right direction.
BeyondDL
May 09, 2012 BeyondDL rated it really liked it  ·  review of another edition
Shelves: the-big-list
Hubbard's work is a comprehensive and timely investigation of the nature of today's risk management practices. Quickly ushered to completion the book opens up the chasm of risk management that is the financial crisis of 2008 while taking the reader across on a rope bridge. Enjoy the view but don't look down for too long.
Andrecrabtree
3 stars only because if read many of the books that took off for this one. Plus I've read "how to measure..." And there isn't much new here. Read if you're just getting started with Hubbard or are a completist.
David
Oct 18, 2013 David rated it really liked it  ·  review of another edition
Muy buen trabajo en el campo de Riesgos Financieros, menciona esos "detalles" que muchas veces dejamos pasar sin darnos cuenta de las consecuencias que pueden acarrear
Brandon Carlson
Aug 30, 2012 Brandon Carlson rated it really liked it  ·  review of another edition
Liked it. Lots of bashing on management consulting and subjective risk assessments, but was good nonetheless.
Tim
Apr 06, 2012 Tim rated it it was amazing  ·  review of another edition
I never really liked rating risks as low, medium, high - or any other arbitrary scale. This book does an excellent job explaining why - and proposes a solid, reliable replacement.
David
Jan 14, 2013 David rated it really liked it  ·  review of another edition
Very interesting take.
Knowing nothing makes it easy to improve your knowledge with the simplest measurements
Jennifer
Jennifer rated it it was amazing
Feb 24, 2011
Lewis Brown
Lewis Brown rated it liked it
Nov 11, 2014
Doug Hohlbaugh
Doug Hohlbaugh rated it did not like it
Aug 10, 2015
Dan
Dan rated it really liked it
Dec 27, 2016
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“Explanations involving conspiracy, greed, and even stupidity are easier to generate and accept than more complex explanations that may be closer to the truth.

A bit of wisdom called Hanlon's Razor advises us 'Never attribute to malice that which can be adequately explained by stupidity.' I would add a clumsier but more accurate corollary to this: 'Never attribute to malice or stupidity that which can be explained by moderately rational individuals following incentives in a complex system of interactions.' People behaving with no central coordination and acting in their own best interest can still create results that appear to some to be clear proof of conspiracy or a plague of ignorance.”
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