This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is Risk Management too Much for Mere Mortals?

NEW YORK ( TheStreet) -- Sen. Chris Dodd of Connecticut and Rep. Barney Frank of Massachusetts, both Democrats, saw nothing wrong with the subprime mortgage industry, Fannie Mae (FNMA) or Freddie Mac (FMCC) months before the meltdown.

Hewlett-Packard's (HPQ) board seemed befuddled by then-CEO Leo Apotheker's decision to sell off HP's core PC business.

Incredible experts of investment, J.P. Morgan Chase's (JPM) Jamie Dimon and Ina Drew were unable to understand the $2 billion gamble, er, investment, they made.

MF Global's chief, former New Jersey senator and governor and former Goldman Sachs (GS) CEO Jon Corzine had a problem misplacing $1.6 billion.

And the list goes on....

It seems the most blatantly obvious issues that could risk the downfall of millions of employees, investors and other stakeholders were unpredictable, unknown or incomprehensible for even the smartest people in America.

Excuse the hyperbole, but surely when the best and brightest and most powerful can't get it right, how can the Securities and Exchange Commission and Department of Justice go after any company for not getting it right?

Is risk management too much for mere mortals?

Maybe the billions of dollars invested in salaries, hardware, software, consultants, lawyers, accountants and enforcement is simply a waste.

But wait a minute: Isn't risk about deciding, "Does the upside outweigh the downside?"

No, most executives seem to think it's about, "Is the worst likely to happen and, if so, can we survive it?"

These are two different views. The former is common sense while the second is gambling on survivability.

The first scenario says, "Our reputation is too important to jeopardize on this move, decision, etc."

The second scenario of likelihood and survivability yields settlements and calculated gambling that begging forgiveness and paying a fine is "the cost of doing business."

The reality is there is no crystal ball for predicting a catastrophe, but there certainly is common sense board governance and CEO leadership that should avoid risk by "putting it all on black 22."

Risk is not gambling, or it least it shouldn't be.

Risk is knowing the value of your company and determining the values that will govern its sustainability and growth.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 1.64%
FB $117.43 -0.96%
GOOG $692.36 -0.84%
TSLA $232.32 -3.92%
YHOO $36.01 -1.42%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs