In my spare time, I like to read about current affairs. I have an interest in Brexit and its resulting economic impact which I covered well before the referendum here. My current reading list is here. My interests include the Middle East, and it was with that in mind that I picked up a book by the late Shimon Peres, former President of the State of Israel, which he completed just before he passed away in September 2016. He also served as Finance Minister when hyperinflation was one of the main features of the economy and initiated a bold programme that tamed inflation successfully.
I found the title of the book, No Room for Small Dreams, a bit puzzling. I guess I did not expect a book title that reflects on someone’s achievements to start with ‘no’. In any case, the book was quite interesting, articulating Peres’s role in some of the policy challenges of the State of Israel. However, I can never stray too far from my professional interests, and I found that the book included a good many observations relevant to the practice of risk management.
The first observation is that often, not taking a risk is a risk in itself.
So many times in our lives, we struggle to confidently leap forward, averse to the possibility that we will fall flat. Yet this fear of taking risks can be the greatest risk of all.
People in risk and compliance functions should bear this in mind when they advise against a course of action. However, if you want to take risks or are implementing regulatory risk requirements, you will need to consider meaningful options:
I’d come to believe that when you have two alternatives, the first thing you must do is look for a third—the one you did not think of, that doesn’t yet exist.
I learned about the virtue of imagination and the power of creative decision making. ... We were quick and creative, and boldly ambitious, and in that we found our reward.
The challenge is really about options being meaningful. That is not straightforward and requires consistent support from leadership:
“We have to use our imagination and examine any idea, as crazy as it may seem,” I insisted to those assembled. “I want to hear the plans you have.” “We have no plans,” responded one. “Then I want to hear the plans you don’t have,” I replied.
If leaders demand allegiance without encouraging creativity and outside inspiration, the odds of failure vastly increase. … [W]ithout emboldening people to envisage the unlikely, we increase risk rather than diminish it.
Interestingly, it is Peres’ view that leadership also has an obligation to understand the technical details of the subject matter.
I felt it essential to gain a degree of mastery in the science that would be driving the project. In previous endeavours, I have come to understand that in addition to a clear vision and strategy, true leadership requires intricate knowledge—a facility with the granular details of every aspect of the mission.
And finally, a word of caution about learning too much from failures:
It is only after we see failure that we can know if we misjudged the risk. ... But one must avoid the temptation to overlearn specific tactical lessons born out of failure or success. … This is one of the hardest things for some leaders to understand: a decision can be right even if it leads to failure.
This is something that I have covered here. It is not an easy perspective for politicians and business leaders, though I’d like to think that this is where governance might prove itself valuable.