How to Plan for the Unexpected

When it comes to risk, human nature is as important a guide as fancy forecasting models -- and the cyclical nature of western economies may, in fact, be the human condition, suggests risk management expert Gerald Ashley.

The author of "Financial Speculation", Ashley believes decisions are heavily weighted by human behaviour, our perceptions of what the market is doing and our individual appetite for risk.

Yet companies in the financial sector and elsewhere rely heavily on forecasting models such as scenario planning. Why didn't they work? As the financial meltdown amply proved, forecasting will only get you so far.

If the senior executives don't understand the difference between measuring risk and managing it, the company's ability to plan for accidents or sudden changes of fortune will be seriously hampered.

Here he talks about how companies can plan for unexpected events -- and why it's important that number crunchers and "non-maths" executives make risk-related decisions together.