Offense and Defense

Return and risk

Although I’ve spent most of the last 10+ years focused on risk management, I still find it difficult at times to simply explain why it’s so fundamental. And, I’d say communicating it’s purpose and merits is pretty crucial these days. So, here’s one analogy: offense and defense.

In the business world, returns are offense. It’s the huge sales numbers, profit margins, making money. A high-flying offense is fun to watch. The offensive superstars get most of the airtime and press.

Risk is defense. It’s making sure you’re protecting those gains made by the offense, watching for threats, preparing for potential problems. It plays a supporting role.

That being said, it’s key to remember that defense remains fundamental to success. No matter how good an offense is, there still has to be a defense (even if a super good offense can sometimes get away with a defense that’s not very good).

Defense is typically under appreciated unless it is so unbelievably good that it somehow transcends the game. There are many examples of teams that won it all on the strength of their defense but those examples are treated more as interesting exceptions to the norm. Balancing both offense and defense, risk and return, is the most tried and true path to success.

Risk management is important - it’s just not the side that’s going to get the attention. That being said, when it’s weak or completely fails, you can bet people are going to notice, especially when it’s failures are the downfall of a good offense!