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No construction project is risk free.
Risk can by managed, minimized, shared, transferred or accepted. It cannot be ignored!
– Sir Michael Latham (1994)
Sir Michael Anthony Latham (born 20 November 1942, Southport, Lancashire) was British Conservative Member of Parliament for Melton from February 1974 to 1983, and for Rutland and Melton from 1983 until he stood down in 1992.
In 1994, he wrote the influential joint government and industry report ‘Constructing the Team’ (known as the Latham Report). In it he advocated partnerships within the fragmented construction industry.
He is Chairman of the Construction Industry Training Board, of ConstructionSkills, the Sector Skills Council for Construction, Deputy Chairman of Willmott Dixon Limited, Chairman of the Collaborative Working Centre Limited and was from 2000-2005 non-executive Deputy Chairman of BIW Technologies.
In November 1994, Alan Greenspan, Chairman of the Federal Reserve Board, declared:
There are some who would argue that the role of the bank supervision is to minimize or even eliminate bank failure; but this view is mistaken, in my judgment. The willingness to take risk is essential to the growth of a free market economy…[I]f all savers and their financial intermediaries invested only in a risk-free assets, the potential for business growth would never be realized.
– Peter L. Bernstein, Against The Gods, The Remarkable Story of Risk
Alan Greenspan (born March 6, 1926) is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006.
Game theory brings a new meaning uncertainty. Earlier theories accepted uncertainty as a fact of life and did little to identify its source. Game theory says that the true source of uncertainty lies in the intention of others. – Peter L. Bernstein, Against The Gods, The Remarkable Story of Risk
Game theory is the study of strategic decision making. More formally, it is “the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.”
Game theory is mainly used in economics, political science, and psychology, as well as logic and biology. The subject first addressed zero-sum games, such that one person’s gains exactly equal net losses of the other participant(s).
Modern game theory began with the idea regarding the existence of mixed-strategy equilibria in two-person zero-sum games and its proof by John von Neumann.
Arrow is the father of the concept of risk management as an explicit form of practical art. – Peter L. Bernstein, Against The Gods, The Remarkable Story of Risk
Kenneth Joseph Arrow (born August 23, 1921) is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51.
In economics, he is considered an important figure in post-World War II neo-classical economic theory. Many of his former graduate students have gone on to win the Nobel Memorial Prize themselves. Arrow’s impact on the economics profession has been tremendous. For more than fifty years he has been one of the most influential of all practising economists.
Until we can distinguish between an event that is truly random and an event that is the result of cause and effect, we will never know wheter what we see is what we´ll got, nor how we got what we got. When we take a risk, we are betting on an outcome that will result from a decision we have made, though we do not know for certain what outcome will be. The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us. – Peter L. Bernstein, Against The Gods, The Remarkable Story of Risk
The next step was to tackle the question on how human beings recognize and respond to the probabilities they confront. This, ultimately, is what risk management and decision-making are all about and where the balance between measurement and gut become the focal point of the whole story. – Peter L. Bernstein, Against The Gods, The Remarkable Story of Risk
The word risk derives from the early Italian risicare, which means “to dare”. In this sense, risk is a choice rather than a fate. The actions we dare to take, which depend on how free we are to make choices, are what story of risk is all about. And that story helps define what it means to be a human being. – Peter L. Bernstein, Against The Gods, The Remarkable Story of Risk
The issue boils down to one´s view about the extent to which the past determines the future. We cannot quantify the future, because it is an unknown, but we have learned how to use numbers to scrutinize what happened in the past. But to what degree should we rely on the patterns of the past to tell us what the future will be like? Which matters more when facing a risk, the facts as we see them or our subjective belief in what lies hidden in the void of time? Is risk management a science or an art? Can we even tell for certain precisely where the dividing line between the two approaches lies? – Peter L. Bernstein, Against The Gods, The Remarkable Story of Risk