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Newsletter Apr 2007

News update 2007-04: April 2007

1. Last issue
2. Newsletter information

1. Last issue

Some of you may have noticed that this newsletter hasn’t appeared
for a while, and somebody has even asked why (hi Steve!).

Early this year I decided that I was going to stop being an
independent consultant, and started to look for another role. The
search was successful, and at the beginning of May 2007 I start
work at the Board for Actuarial Standards, which is part of the
Financial Reporting Council.

Under the circumstances the newsletter rather faded out of the
picture. It’s not as if there’s been a dearth of things to write
about, though; most obviously, the recent RIM outage which was caused,
apparently, by a software upgrade that went wrong.

Looking back over the incidents and issues I’ve written about over
the past few years, I think there’s a simple theme that emerges:
you can’t count on things not going wrong. The fact that something
hasn’t happened in the past doesn’t mean that it’s not going to
happen in the future. The trouble is that we learn from experience.
In practice, this often means that we don’t learn from what we
don’t experience. There’s a new book just out, which I haven’t read
yet but which looks very interesting, that’s relevant here: The
“Black Swan: The Impact of the Highly Improbable” by Nassim
Nicholas Taleb. I’m looking forward to reading it.

Even when you are aware of a risk, because the bad event has
happened before, it’s often quite difficult to be as realistic
about it as you should. Software development is an excellent
example here; all software developers have written software that
they thought would work, only to be surprised when it turns out to
contain bugs. The first time this happens, the initial belief may
be reasonable. When it has happened over and over again, the
developer’s confidence may seem less reasonable. However, each time
the developer (and I speak personally here) can produce plausible
justifications: they have learned from their previous experiences,
and taken steps to avoid all the problems that have arisen in the
past. The problem is that there are always more, new, problems that
can arise. Never believe anyone who says “it could never happen”.

An excellent newsletter about risks is the Risks Digest. Although a
number of its items are fairly technical, there are many that raise
more general issues that are widely applicable. I’ve been reading
Risks on and off for nearly twenty years, and shall certainly
continue doing so.

2. Newsletter information

This is the last issue of a monthly newsletter on risk management
in financial services, operational risk and user-developed software
from Louise Pryor ( Copyright (c)
Louise Pryor 2007. All rights reserved. You may distribute it in
whole or in part as long as this notice is included.

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