Penny Wise and Pound Foolish

Michael Chertoff, US Secretary of Homeland Security, recently shared his thoughts on the current financial crisis and how our nation has addressed it from a risk management perspective.  In his remarks to the Wharton Business School, Mr. Chertoff was quite candid about the United States' lack of preparation to manage risks before they manifested into a full-blown crisis.  He stated,

"The nation now faces financial woes that were to some degree or another predicted over a period of years, going back into the 1990s.... We have not managed to address the risk in a way that prevented what was ... a [financial] disaster of the magnitude of a natural disaster and a terrorism disaster."

He also warned that for both the US Government and corporations, risk management often becomes less of a concern once the crisis has subsided.  

"We begin to decide that we are spending too much money trying to avert the risk, and we begin to degrade our preparation once again." 

As we have seen with the escalating costs of the current financial crisis, risk management is certainly not an area to be penny wise and pound foolish.