The Failure of Risk Management. Douglas W. Hubbard

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The Failure of Risk Management

      WHY IT'S BROKEN AND HOW TO FIX IT

       Second Edition

       DOUGLAS W. HUBBARD

This second edition first published 2020

      © 2020 by Douglas W. Hubbard. All rights reserved.

      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

      Published simultaneously in Canada.

      Edition History

      John Wiley & Sons, Inc. (1e, 2009)

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       Library of Congress Cataloging-in-Publication Data

      Names: Hubbard, Douglas W., 1962– author.

      Title: The failure of risk management : why it's broken and how to fix it / Douglas W. Hubbard.

      Description: Second edition. | Hoboken, New Jersey : Wiley, 2020. | Includes index.

      Identifiers: LCCN 2019051494 (print) | LCCN 2019051495 (ebook) | ISBN 9781119522034 (hardback) | ISBN 9781119522027 (adobe pdf) | ISBN 9781119522041 (epub)

      Subjects: LCSH: Risk management.

      Classification: LCC HD61 .H76 2020 (print) | LCC HD61 (ebook) | DDC 658.15/5—dc23

      LC record available at https://lccn.loc.gov/2019051494

      LC ebook record available at https://lccn.loc.gov/2019051495

      Cover Design: Wiley

      Cover Image: © RomoloTavani/iStock.com

I dedicate this book to my entire support staff: my wife, Janet, and our children, Evan, Madeleine, and Steven, and to the Armed Forces of the United States of America.

About the Author

      Mr. Hubbard's career in quantitatively based management consulting began in 1988 with Coopers & Lybrand. He founded Hubbard Decision Research in 1999 and he developed the applied information economics (AIE) method to solve complex, risky decisions. He has used AIE in many fields, including cybersecurity, aerospace, biotech, environmental policy, commercial real estate, tech startups, entertainment, and military logistics, to name a few. His AIE methodology has received critical praise from respected research firms such as Gartner, Forrester, and others.

      He is the author of the following books (all published with Wiley between 2007 and 2016):

       How to Measure Anything: Finding the Value of Intangibles in Business (one of the all-time, best-selling books in business math)

       The Failure of Risk Management: Why It's Broken and How to Fix It

       Pulse: The New Science of Harnessing Internet Buzz to Track Threats and Opportunities

       How to Measure Anything in Cybersecurity Risk (coauthored with Richard Seiersen)

His books have sold over 140,000 copies in eight languages and are used as textbooks in dozens of university courses including at the graduate level. Two of his books are required reading for the Society of Actuaries exam prep, and he is the only author with more than one on the list. In addition to his books, Mr. Hubbard has published articles in Nature, The American Statistician, IBM Journal of R&D, CIO Magazine, and more.

Preface

      A lot has happened in the decade since the first edition of this book, both in the world of risk management and in my own work. Since then, I've written two more editions of my first book, How to Measure Anything: Finding the Value of Intangibles in Business as well as writing Pulse: The New Science of Harnessing Internet Buzz to Track Threats and Opportunities and How to Measure Anything in Cybersecurity Risk. By 2017 this book (along with How to Measure Anything) was placed on the required reading list for the Society of Actuaries Exam Prep.

      Regarding the broader topic of risk management, there were several more examples of risk management gone wrong since the first edition. The Fukushima Daiichi nuclear power plant disaster in Japan, the Deepwater