Risk mitigation: a myth of infinite cost and finite risk

You are all familiar with a typical presentation on risk management where we see the same old graph that depicts the risk as finite on one side and the costs of mitigation as infinite on the other side and attempts to show us a balance between the two where the costs are minimal. Well, the idea is correct but guess what? The graph is wrong. The graph is wrong and it gives you a wrong idea of cost distribution which in turn causes you to bias towards more risk. That graph actually makes you and your business less risk-averse. How?

A “traditional” risk cost versus mitigation cost trade off graph.

You see, the idea that the risk is finite while the risk mitigation cost is infinite is a myth.

Risk mitigation cost is only infinite when your resources are lower than those required for mitigation. So, yes, this is possible but unlikely. There are limits to our technology and there are limits to the investment effectiveness but there is a limit to the numbers of risks and mitigation techniques that a business can apply. So the risk mitigation costs may be very high and you may be unwilling to pay …
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Japan after 2014 elections

The exit polls at the House of Representatives elections held in Japan on December 14, 2014 indicate that Shinzo Abe’s Liberal Democratic Party is set to “win by a landslide”, according to BBC. In reality, the apathy of the public has won Shinzo Abe a carte blanche to do with the Japanese economy as he wishes.

The government said turnout was at just 35%, two hours before polls closed. This election had the worst voter turnout under the current constitution ever. The day after elections all sources quote not the government but the Kyodo news agency that guesstimated the vote turnout at 52.7%. Saves the face of the government, I guess. It would have been hard to cite overwhelming popular support with just one third of the population voting.

The election was rigged as an approval referendum for the economic policies of Abe and this point was completely missed by the general public. They probably also missed the point that Abe will be in the office for four years instead of remaining two. WSJ reports that the public was generally confused regarding the purpose of the snap election and no wonder.

Despite all, the election is literally trumpeted as …
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Will Sony Corporation be up for grabs soon?

Did you notice a recurring theme in corporate takeovers these years? Now we see at Sony Corporation what we saw not so long ago at Nokia. The company received a new top management team that cut all investment into the advanced research and development of new products. The company sells a lot of its assets bringing the value of the company down and the resulting cash is quickly used up. Then, more cuts are executed among product development teams, causing the company to stall and fall behind the competition. The company then suffers a few bad publicity events, causing the share price to drop and leaving the company strapped for cash in the wake of damage compensation payouts. The company is up for grabs and we finally learn who planned and executed the hostile takeover.

The scenario worked well on the mobile phones icon Nokia and may soon play out on the consumer electronics icon Sony.

It was on November 25 that Sony Pictures hacking first emerged. On November 29, copies of Sony’s unreleased movies Annie and The Interview appeared on some sites. Last week, salaries of some executives were revealed, followed by personal data of other employees. Some …
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