Things that have never happened before happen all the time

Good morning, good afternoon, or good evening depending on whether you are at the event in person or logging in remotely from another part of the world. I am very grateful to Dr. Blaise Ijebor for inviting me to present today at the Central Bank of Nigeria’s Second National Risk Management Conference.

Let me start by saying that the views I will express are my own and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.

Today, I’d like to share my perspectives, experiences, and learnings to reflect on how we can use risk management to enable us to achieve our goals even in the face of surprises and challenges. The main point I want to make is that, by integrating risk management into plans, decisions, and actions, we can succeed over a wider range of possible futures, not just the future we expect (or hope for).

I’ll initially highlight a few potential misunderstandings that might prevent us from getting the most out of risk management.

The first is that risk management is mainly a way to stop bad things from happening. Of course, risk management should help us reduce the frequency and size of negative events and then recover more quickly and effectively when negative events occur.

But, risk management, in my view, should also help the right things happen by giving us tools to work more effectively.2 Innovation is an essential tool to manage risks, because not changing can be riskier than changing. For example, an incredibly powerful risk management activity is to transform a slow, manual process that often fails into a fast, efficient, automated process that can self-correct when there is a problem. Clearly, it is just as important to understand the risk of not doing something as it is to understand the risk of doing something. And, when we understand our risk appetite and our risks, we can comfortably conduct controlled experiments, learn faster, and innovate. We’re no longer driving in the dark; we’re getting where we want to go with headlights on, and we can stay inside the guardrails and not skid off the road.