Rethinking Risk in National Security Lessons of the Financial Crisis
This book examines the role of risk management in the recent financial crisis and applies lessons from there to the national security realm. It rethinks the way risk contributes to strategy, with insights relevant to practitioners and scholars in national
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Rethinking Risk in National Security Lessons of the Financial Crisis for Risk Management Michael J. Mazarr
Michael J. Mazarr RAND Corporation Arlington, VA, USA
ISBN 978-1-349-94887-1 ISBN 978-1-349-91843-0 (eBook) DOI 10.1007/978-1-349-91843-0 © The Editor(s) (if applicable) and The Author(s) 2016 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Nature America Inc. New York
Contents List of Tables and Boxes
vii
Acknowledgments
ix
Part I Background 1 Risk, Judgment, and Uncertainty
3
2 Defining Risk
19
3 Approaches to Risk in National Security
35
Part II Lessons of the Crisis—The Character of Risk 4 Risk and Uncertainty
51
5 Risk Is What We Make of It
65
6 Indifferent to Consequences
77
7 The Swans to Worry About Are Gray
89
8 Risk Becomes Personalized
101
9 What You Don’t Know Can Destroy You: Ignorance and Correlated Risk
113
10 Risk, Incentives, and Culture
125
Part III Toward Improved Risk Practices 11 The Role of Risk in Strategy
143
12 Outcome Assessment of the Emerging US National Security Strategy
157
13 Principles of Effective Risk Management
175
14 Managing Uncertainty
189
Notes
207
Bibliography
233
Index
241
v
List of Tables and Boxes Tables 14.1
Managing risk vs. managing uncertainty
192
Boxes 11.1
Categories of outcome risks
154
13.1
Revised approach to categorizing risk
186
14.1
Principles for managing uncertainty
195
vii
Acknowledgments This study emerged from research undertaken several years ago on the potential for “strategic insolvency” inherent in the US national security posture. I would like to thank Alex Lennon, the esteemed editor of The Washington Quarterly, for his support in getting that analysis to a wider audience. Without him, this book would not have been possible. I owe most direct thanks for this work to Dr. Marin Strmecki of the Smith Richardson
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