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jerryking : low_probability   7

Marty Chavez Muses on Rocky Times and the Road Ahead
NOV. 14, 2017 | - The New York Times | By WILLIAM D. COHAN.

Mr. Chavez is about as far from the stereotypical Wall Street senior executive as you can imagine, and that is one reason his musings about the future direction of Wall Street are listened to carefully.

He grew up in Albuquerque, one of five children, who all went to Harvard. He got a doctorate in medical information sciences from Stanford University. (At that time, he was known by his full name Ramon Martin Chavez.)

In 1990, Mr. Chavez came out, the day after he defended his doctoral dissertation. – “Architectures and Approximation Algorithms for Probabilistic Expert Systems.” He is one of the few openly gay executives on Wall Street. ......In his current role as Goldman's CFO, Marty views his job as a simple one that is hard to get right: “I’m not paid or evaluated on the accuracy of my crystal-ball predictions,” he said. “I’m paid to enumerate every possible outcome and do something about every possible outcome well in advance, when it’s still possible to do something, because once it’s happened it’s too late.”....Unlike many of his peers on Wall Street, Mr. Chavez does not complain about the extent of the regulation that hit the financial industry as a result of Dodd-Frank. Generally speaking, he says, the regulations have helped banks “confront their problems and capitalize and bolster their liquidity,” making them “stronger as a result,” and the financial system safer and more profitable.....Instead of complaining about the extra expense and manpower required to comply with the mountain of new regulations, Mr. Chavez chooses instead to think about it differently. “If you approach the regulations as ‘Oh, we’ve got to comply,’ you’ll get one result,” he said. He prefers thinking about the regulations as, “This makes us and the system and our clients safer and sounder, and yes it’s a lot of work, but what can we learn from this work and how can we use this work in other ways to make a better result for our shareholders and our clients? Everywhere we look we’re finding these opportunities and they’re very much in keeping with the spirit of the times.”

Like any good senior Goldman executive, he does worry. (Lloyd Blankfein, the Goldman chief executive, once told me he spent 98 percent of his time worrying about things with a 2 percent probability.)

His biggest concern at the moment is the risk of “single points of failure” in the vast world of cybersecurity (JCK: SPOF). He worries about any individual “repository of information” that does not have a backup and that can “be hacked.”

He does not even trust Goldman’s own computer system; he treats it as a potential enemy.

.....What also makes Goldman different from its peers is the firm’s love affair with engineers. At the moment, he said, engineers comprise around 30 percent of Goldman’s work force of about 35,000. It’s what drew him to Goldman in the first place — to work on Goldman’s in-house software, “SecDB,” short for “Securities Database,” an internal, proprietary computer system that tracks all the trades that Goldman makes and their prices, and regularly monitors the risk that the firm faces as a result.

He said the system generates some million and a half points of data that were used to calculate, for the first time, the firm’s “liquidity coverage ratio” — now 128 percent — and that were shared with regulators every day. He’s been busy trying to figure out how the newly generated data can be used to help him understand what the firm’s liquidity will be a year from now.

That way, he said, in his principal role as Goldman’s chief financial officer, he can perceive a problem in plenty of time to do something about it. “We’re able to get much better actionable insights that make the firm a less risky business because we’re able to go much further out into the future,” he said......
actionable_information  CFOs  cyber_security  databases  Dodd-Frank  engineering  financial_system  Goldman_Sachs  improbables  information_sources  jujutsu  low_probability  Martin_Chavez  proprietary  regulation  SecDB  SPOF  think_differently  Wall_Street  William_Cohan  worrying 
november 2017 by jerryking
Tornado-Ravaged Hospital Took Storm-Smart Approach During Rebuild - Risk & Compliance Journal.
Aug 30, 2017 | WSJ | By Ben DiPietro.

...................“Preparation for what these events can be–and belief they can actually happen–is important so you make sure you are preparing for them,” ....trying to undertake whatever is your organizational mission in the midst of a tornado or other devastating event is much harder, given the high emotions and stress that manifests itself at such moments.

“Understand the possibilities and pre-planning will make that go a lot better,”

===============================
As Hurricane Harvey has shown, extreme weather events can devastate a region’s infrastructure. Hospital operator Mercy had its own experience of this in 2011 when a tornado ripped through Joplin, Mo., killing 161 people and destroying its hospital.

Hospital operator Mercy took the lessons it learned from that tornado experience and incorporated them into the design of the new hospital–and also changed the way it plans and prepares for disasters. The new facility reflects a careful risk assessment, as Mercy took into account not only the physical risk of tornadoes but the risks to power supplies and medical supplies.

“We always prepare, always have drills for emergencies, but you never quite can prepare for losing an entire campus,” ....“Now we are preparing for that…it definitely changed the way we look at emergency management.”

** Protecting What Matters Most **
Mercy took the lessons it learned from that devastating weather event and applied them when it was time to build its latest hospital, which was constructed in a way to better withstand tornadoes while providing more secure systems infrastructure and adding backup systems to ensure operations continued unimpeded, ......Even the way medical supplies were stored was changed; instead of storing supplies in the basement, where they were inaccessible in the immediate aftermath of the tornado, they now are kept on each floor so staff don’t need to go hunting around for things they need during an emergency.....“The first priority is to save lives, the second is to minimize damage to the facility,”

** Focus on the Worst **
many companies worry about low-severity, high-frequency events–those things that happen a lot. They instead need to focus more on high-severity events that can cause a company to impair its resilience. “....identify and work on a worst-case scenario and make sure it is understood and the company is financially prepared for it,”

work with its key vendors and suppliers to know what each will do in the face of a disaster or unexpected disruption. “...large companies [should] know their key vendors prior to any major incidents,” ...“Vendors become partners at that time and you need to know people will do what you need them to do.”

A company needs to assess what is most important to its operations, map who their vendors are in those areas and engage them in various loss scenarios .... It should review its insurance policy language against possible weather events, identify any gaps and either revise policies to fill those holes or to at least make sure executives understand what the risks are of leaving those gaps unattended.
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See also :
What to Do Before Disaster Strikes - WSJ.com ☑
September 27, 2005 | WSJ | By GEORGE ANDERS.
start by cataloging what could go wrong. GM, for example, has created "vulnerability maps" that identify more than 100 hazards, ranging from wind damage to embezzlement. Such maps make it easier for managers to focus on areas of greatest risk or gravest peril.
low_probability  disasters  Hurricane_Harvey  extreme_weather_events  hospitals  tornadoes  design  rebuilding  preparation  emergencies  lessons_learned  worst-case  natural_calamities  anticipating  insurance  vulnerabilities  large_companies  redundancies  business-continuity  thinking_tragically  high-risk  risk-management  isolation  compounded  network_risk  black_swan  beforemath  frequency_and_severity  resilience  improbables  George_Anders  hazards  disaster_preparedness  what_really_matters 
september 2017 by jerryking
VC Pioneer Vinod Khosla Says AI Is Key to Long-Term Business Competitiveness - CIO Journal. - WSJ
By STEVE ROSENBUSH
Nov 15, 2016

“Improbables, which people don’t pay attention to, are not unimportant, we just don’t know which improbable is important,” Mr. Khosla said. “So what do you do? You don’t plan for the highest likelihood scenario. You plan for agility. And that is a fundamental choice we make as a nation, in national defense, as the CEO of a company, as the CIO of an infrastructure, of an organization, and in the way we live.”....So change, and predictions for the future, that are important, almost never come from anybody who knows the area. Almost anyone you talk to about the future of the auto industry will be wrong on the auto industry. So, no large change in a space has come from an incumbent. Retail came from Amazon. SpaceX came from a startup. Genentech did biotechnology. Youtube, Facebook, Twitter did media … because there is too much conventional wisdom in industry. ....Extrapolating the past is the wrong way to predict the future, and improbables are not unimportant. People plan around high probability. Improbables, which people don’t pay attention to, are not unimportant, we just don’t know which improbable is important.
Vinod_Khosla  artificial_intelligence  autonomous_vehicles  outsiders  gazelles  unknowns  automotive_industry  change  automation  diversity  agility  future  predictions  adaptability  probabilities  Uber  point-to-point  public_transit  data  infrastructure  information_overload  unthinkable  improbables  low_probability  extrapolations  pay_attention 
november 2016 by jerryking
9/11 and the age of sovereign failure -
Sep. 10, 2011 | The Globe & Mail | Michael Ignatieff.. One
of the tasks we ask govt. to perform is to think the unthinkable. Yet on
9/11, govt. institutions failed...A sovereign is a state with a
monopoly on the means of force...It is there to think the unthinkable
and plan for it. A sovereign failed that morning.... There has been a
cascade of failure: (1) No WMDs found in Iraq; (2) The failure of the
levees & New Orleans civil authority following Hurricane Katrina;
(3) the 2008 mortgage bubble and govt. regulators; (4) the failure of
govt. regulators to catch BP before the Spring 2010 oil spill. ...While
there are a lot of things a govt. might do, there are a few things that
only a govt. can do: protect the people, rescue them when they are in
danger, regulate against catastrophic risk and safeguard the full faith
and credit of their currency. Sovereigns matter. And rebuilding their
legitimacy, their capacity and their competence is the political task
that matters most......It is always good to be skeptical about what governments tell us. But we are beyond skepticism now, into a deep and enduring cynicism. There will come a day when they are not crying wolf and we will not believe them. Then we will be in trouble. Some trust in government is a condition of democracy and security alike. That trust has been weakened and can't be rebuilt until sovereigns say what they mean, mean what they say and do what they promise.
Michael_Ignatieff  failure  government  9/11  low_probability  catastrophic_risk  priorities  unthinkable  sovereign-risk  state-as-facilitator  legitimacy  capacity  competence  oil_spills  cynicism  skepticism  policymaking 
september 2011 by jerryking
Spillonomics - Underestimating Risk - NYTimes.com
May 31, 2010 |NYT | By DAVID LEONHARDT. The people running BP
did a dreadful job of estimating the true chances of events that seemed
unlikely — and may even have been unlikely — but that would bring
enormous costs....We make two basic — and opposite — types of mistakes.
When an event is difficult to imagine, we tend to underestimate its
likelihood. This is the proverbial black swan...On the other hand, when
an unlikely event is all too easy to imagine, we often go in the
opposite direction and overestimate the odds.
BP  risk-taking  risk-assessment  oil_spills  mistakes  black_swan  underestimation  underpricing  unthinkable  overestimation  dual-consciousness  unimaginable  frequency_and_severity  improbables  disasters  disaster_preparedness  imagination  low_probability 
june 2010 by jerryking
Business.view: Not up in the air
Apr 20th 2010 | From The Economist online. The volcanic
disruption is a classic example of the sort of low-probability event
that might once have been marginal for businesses, but has acquired far
greater significance thanks to the growing interconnectedness of the
globalized economy.
risk-assessment  risk-management  natural_calamities  global_economy  low_probability 
april 2010 by jerryking
'A Failure of Capitalism - The Crisis of ’08 and the Descent Into Depression,' by Richard A. Posner - Review - NYTimes.com
May 14, 2009 | New York Times | by JONATHAN RAUCH who reviews A
FAILURE OF CAPITALISM: The Crisis of ’08 and the Descent Into
Depression, by Richard A. Posner, In this compact and bracingly lucid
volume, he offers a simple, but not simplistic, primer: “a concise,
constructive, jargon- and ­acronym-free, nontechnical, unsen­sational,
light-on-anecdote, analytical examination of the major facets of the
biggest U.S. economic disaster in my lifetime and that of most people
living today.” See also In “Catastrophe: Risk and Response” (2004), in
which Posner took up the problem of low-probability, high-impact events.

346 pp. Harvard University Press. $23.95
book_reviews  recessions  Richard_A._Posner  capitalism  politicaleconomy  economic_downturn  low_probability  catastrophic_risk  primers  high-impact 
may 2009 by jerryking

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