Thursday, August 13, 2009

Risk Management?

I've been thinking about risk management today. Normal risk management is required for daily life. It's a part of self preservation. But when risk management is taken to an extreme it causes a sort of psychotic paralysis in individuals. When risk management is exercised to an extreme degree on a larger scale, our culture and society suffers not only cultural paralysis but also societal degradation.

The corporation as an entity is supposed to practice risk management as an accepted best practice, though we did not seen investment banks reign in their own risks. Risk management does not seem to be practiced horizontally by corporations, but rather vertically, being dictated from the top down. This is backwards, of course, as the monetary savings gained through risk management applied at the lowest level in the corporation is small when compared to what could be saved by applying true risk management to upper level exchanges. The exception to this is in the health insurance industry, where extreme risk management at the lowest levels has proved highly profitable to health care industry executives.

Risk Management is killing our culture. Corporate risk management is killing the radio & record industries. Worse it's created the health care mess. When corporations try to monetize art, art pays the price. When corps decided to monetize health, the sick paid the price. People are risky. It's not that health insurance is evil, rather that the business model should not be applied to people and their health - it's immoral.

The Corporations' thought that risk costs money leads to attempts to minimize risk and maximize return. Problem is, this model fails with businesses based on successful risk like music. More basically? Corporations are experts at killing the Geese that Lay the Golden Eggs... One of the reasons corporations are so afraid of social media is the element of risk. Risk management may prevent Corps from embracing SM.

Upside Down Corporate Risk Management is hurting our society and is societally at the root of the health care crisis, the economic crash, and culturally at the root of the stagnation of the radio and music industries. It will also get in the way of Corporations adopting Social Media in a meaningful way. The real irony lies in the fact that these corporations are not applying the same degree of risk management to their executive moves, executive compensation and high-level financial transactions. "Do as I say, not as I do," seems to be the modus operandi of the current corporate elite.