Question: How can we better anticipate risk?
Don Tapscott: I have a modest proposal that we need to rethink risk management and we need to apply the principle of “Wikinomics,” my book, to risk.
Number one is, we should be sharing intellectual property. Risk models, algorithms and data should be placed in the Commons. We should have a human genone of risk management or a Linux of risk management.
“Oh! We will never do that, our risk models are a source of propriety competitive advantage,” people say to me. Well, hello! Did anyone notice they not only did not confer competitive advantage, collectively they led to the downfall of the entire industry and created a massive global crisis.
The idea is that you share some of your intellectual property and a rising tide that lifts us boats, and then you compete on a higher level, sharing. We need to have transparency based on risk management. We need to have peering; the financial services industry and its leaders should get together and acts as peers, rather than being the recipients or victims of government legislation. Better grab the bull by the horn and reinvent their industry around these principles, transform risk management and do the right thing. Present a new modus operandi, a new operating model for risk and for financial services.
Recorded on: June 9, 2009.
Discuss
Courtney Frazier on June 30, 2009, 6:53 PM
I’m a big fan of Tapscott, and read and enjoyed his book Wikinomics.
I’m unclear, however, what exactly he means when we says that we should use mass collaborative ‘wiki-like’ approaches toward risk managment in the finance sector. I’m not sure Tapscott does either.
One example Tapscott uses in his book, I believe, draws on the example of Barrick Gold Company, which opened up its proprietary geological information on its land holdings up, with the proposition that any who prosed innovative techniques and suggested good ideas would get a large cash prize ($500k, I believe).
The crucial piece that’s missing in his proposition for the finance sector is the incentive structure for those who work in finance to share their risk models. While the model of mass collaboration was applicable for a question whose specific focus was about a product that Barrick still owned (namely, their land), opening up financial risk models for others’ viewing could very well be used in a competitive setting and, I think, most likely would. More specifically, what’s to stop a company from taking certain aspects of a superiorly designed risk model and incorporating it into their own?
To me, it seems as though Tapscott is trying to apply is ‘mass collaboration’ model to an instance where it does not necessarily work.
Add a Comment
You must be logged in to comment. Log in or Register