Risk management the new whipping boy

While our biggest public companies line up to accept the government handouts (i.e. our tax money) that arose from the Black Swan that just occurred in the financial markets we are glibly told of the reasons why.

"Our risk management was not up to scratch".

As if it was all down to a imperfect process or the shortcomings of a single role. The reasons are many and complex and clouded by political ideology. But this was no Black Swan. It was preventable and it was predictable. A simple debt boom.

Too much borrowing fueled by cheap money and moral hazard from too many prior bailouts. Any financial company not willing to play the game gets left behind in the run-up. So the choice is play the game or get out. Prudent companies and individuals saw what was coming a long time ago and developed plans to deal with it. They cashed out, reduced their debt and waited.

Understanding risk (and being willing to act) can give you a huge competitive advantage in normal situations but it is a matter of survival in times like these.