To Be a Great Risk Manager, Think Tragically

The Greek word for “risk” is not found in the ancient tragedies, yet those plays are the ultimate case studies in risk management. In his book The Tragic Mind, Robert D. Kaplan argues that tragedy is not about being pessimistic; it is about being realistic regarding the limits of human reasoning.

For the Chief Risk Officer (CRO), this is a vital distinction. In our quest for “Apolline order,” the neat rows of heat maps, VaR calculations, and key risk indicators, we often ignore the “visceral chaos,” or “irrational” disorder, lurking beneath the surface of decision-making.

The Greeks understood something modern finance often forgets: The rational and the irrational are not separate silos. To act rationally, one must have a deep understanding of the irrational.

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