Why is it that very smart executives can sometimes make extraordinarily poor risk decisions? This question has bothered observers of the business world for generations, but in the past 18 months it has gained extra importance as we try to make sense of the implosion of the financial services industry.
Of course, the problem of poor risk management is not confined to banking: sectors as different as oil and gas, pharmaceuticals and telecommunications have all experienced their share of poorly judged risks. But the banking industry, and the credit crisis in particular, provides a rich context for understanding where risk management goes wrong and how it can be improved.
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