Here’s our review of Felix Kloman’s new book, The Fantods of Risk, Essays on Risk Management.
The word fantod is an unusual word, especially coming from an expert on risk management. Felix Kloman has practiced the discipline and written authoritatively on the subject for many years.
The word, which refers to a mind in a state of restlessness, has an interesting literary history. It’s been associated with some … well, restless characters: for instance, Charles Dickens memorable Mr. Pickwick and Mark Twain’s Huckleberry Finn. Here’s how Huck uses the word in a comment about the impact of his Aunt’s “pictures” on him:
“These was all nice pictures, I reckon, but I didn’t somehow seem to take to them, because if ever I was down a little, they always give me the fantods.”
Huck was at unease about the practices of a civilized world, which he viewed through the lens of superstitions and his unconventional experiences.
The word fantod in the title of this book, then, serves to remind readers who think they know a lot about risk that they should never delude themselves about uncertainty. It is inappropriate to feel certainty in the face of uncertainty. It’s reasonable, however, that risk should give you the fantods!
This is not an admission that risk management has little value. It’s a statement of conviction that, when confronted with risk, a know-it-all attitude must never super-cede inquiry, curiosity, careful thinking, and even some humility.
The Fantods of Risk, Essays on Risk Management, then, aims to critically re-examine the discipline that deals with uncertainties to question those practices that may be held to be certainties by some. The value for readers is that this book makes us think. As a brief example of the kind of thinking, here are three cautions that Kloman presents, with commentary related to regulatory situations.
1. Understand that risk can be both favourable and unfavourable.
A balanced view of risk needs to consider “a reasonably rational assessment of all potential outcomes.” Connected with this caution is Kloman’s assessment that we should not respond to risk out of fear. An overly risk-adverse response diminishes the potential that something good could happen. From a regulatory perspective, for instance, the issuing of a new license or a renewal represents the possibility of the good that comes from the license holder operating effectively. This must be balanced against knowledge and experience that the license holder might operate in a way damaging to the public interest. The point is that uncertainty involves a range of possibilities from positive to negative and the regulator must balance these possibilities in a way that provides the greatest service to the public interest.
2. Avoid defining “risk management” too narrowly.
Risks are connected and there is interplay between them that goes beyond department walls, institution walls and beyond jurisdictions. Risk is not just the domain of regulatory employees that focus on enforcement matters. Neither is it just the domain of one regulator. For instance, the regulatee, whether an individual or an organization, with responsibility to self govern is also part of the risk domain.
Kloman focuses more attention on the private sector than the public sector, however, much of his thinking transfers across sectors. And, to the extent that public sector managers can benefit from a critical view of what effective governance looks like in relation to an organization’s capability to manage risk effectively and to be compliant, or to account for the use of government funds (transfer payments), or to be a trustworthy external partner, the book provides many insights.
3. The goal of risk management is easily corrupted.
It can be corrupted by not considering views of disparate stakeholders and also by failing to communicate with stakeholders about risks using clear, simple language.
The reason why the views of stakeholders should be considered stems from the idea that organizations exist to create and maintain value, an idea that comes out of the business world. However, it is often stated that corporations exist to create shareholder value. Kloman disagrees, substituting the word stakeholder for shareholder. The word stakeholder, of course, resonates more in the public sector than the business arena. Kloman uses the word stakeholder to make the point that a sharp focus on shareholder value, while having little regard for the investments made by other stakeholders, is a sure way to damage a corporation’s hard earned reputation-a most significant failure for any institution. The “investments” he refers to include: the time and effort invested by employees; the funds invested by customers; the public investments made by the communities that surround facilities; creditors who lend money; “and regulators who represent the interests of society at large.”
The Fantods of Risk, Essays in Risk Management is a worthwhile and enjoyable read for anyone who is curious to know more about risk management.