Moral Hazard Prevention
There are two sides of risk control: the “hard” side and the “soft” side. Thousands of man-hours and untold sums of money have been, and will continue to be spent on the “hard” side of Moral Hazard which includes the following components:
- Risk Oversight Committees
- Policies & Procedures
- Risk Assessments
- Measures & Reporting
- Risk Limits
- Audit Processes
- Systems
However, without an expert like Dunham Cobb in your camp, the “soft” side of Moral Hazard risk control is subjective and difficult to measure. Components of the “soft” side include:
- Risk Literacy
- People
- Skills
- Integrity
- Incentives
- Culture and Values
- Trust and Communication
To date, managing the “soft” side has been far too elusive. Risk management is rooted in the three Ms — measure, monitor and manage, all of which are concepts that are difficult to apply to behavior. The good news is there are ways to mitigate Moral Hazard if a company is willing to de-mystify the motivation behind. For more answers and details click on The Assassin Lurking Within Energy Trading Organizations published in Platts Energy Business and Technology or Managing the Risk of Moral Hazard presented by Dunham Cobb at The Energy Finance & Credit Summit held in Houston.
Why take the risk? Learn what you can do to avoid it. Contact Dunham Cobb today.
dunham@ici-1.com or call 561-818-5518.