2 March 2020
Dig a little, and the regulatory – and perhaps the sensible commercial – answer seem to be that risk management helps organisations make better decisions.
Indeed, it is an often-overlooked part of Solvency II that firms must document their decision-making process as part of their risk management system. [I mentioned this once to a regulator, it was new to them].
I approached Douglas Hubbard’s book ‘How to Measure Absolutely Everything’ with scepticism. The central proposition seemed to me to be absurd. But he makes clear, very early on, that you can only measure things if you plan to use the information to make a decision. It is the nature of the decision that drives the potential for measurement. This I have found to be a really useful question when people ask for data: what decision is affected by the data you are seeking?
Douglas has written for The Actuary, see: https://www.theactuary.com/features/2014/08/measure-for-measure/