BOOK REVIEW No risk management, no reward Risk Management and Innovation in Japan, Britain and the United States,
edited by Ruth Taplin
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Reviewed by Sean Curtin
This groundbreaking book offers fresh insights and analysis on the distinctive
ways business in Japan, the United States and the United Kingdom responds to
risk and innovation.
Assessing and managing risk are becoming increasingly important to both
domestic and international companies,
especially in Japan where firms are struggling to keep pace with the
fast-moving global environment. Several chapters focus on Japan, particularly
those by Anthony Trenton, a legal specialist in intellectual-property law, and
Masatoshi Kuratomi, the Development Bank of Japan's UK representative.
This very timely collection
of research papers, edited by Professor Ruth
Taplin, director of the Center for Japanese and
East Asia Studies, emphasizes the need for a
strong cross-cultural and interdisciplinary
approach to risk management (RM) in today's
rough-and-tumble global market. "In a globalized
world it is
becoming imperative to understand the variations in risk taken at a
cultural level, which affect business decisions profoundly," she said.
Until recently, Japan was classified as a prime example of a society that was
highly risk-adverse, a trait strongly reflected in the agonizingly slow
decision-making processes of its domestic and its international enterprises. By
European, and most definitely US, standards, the typical Japanese boardroom
takes far too long to make management decisions. However, emerging risks, the
relentless tempo of the global market and the rising economic might of China
are all forcing a radical rethink on a reluctant Japan.
Taplin argues that to survive, companies "must innovate at a previously
unparalleled rate and in the context of greater uncertainty". To thrive, firms
have to make their products and services more competitive and add value. A
business must understand how to both manage and protect risk, innovation and
intellectual property (IP). As the percentage of a company's assets represented
by intangibles is constantly rising, essential innovation and the corresponding
exposure to risk are becoming inextricably linked to IP-related issues.
The typical Japanese firm is also finding its assets becoming less and less
tangible, while the breakneck velocity of global information technology is
making a cautious and prolonged decision-making approach obsolete.
Japanese business is facing a simple choice: markedly elevate the importance of
RM or face extinction. Where domestic models cannot be modified to meet this
challenge, innovative non-Japanese constructs are rapidly being adopted. This
process is significantly reshaping business strategies. A similarly dramatic
transformation has already occurred in the way Japanese companies handle
intellectual property rights (see Exploiting Patent Rights and a New Climate for
Innovation in Japan, 2003, also edited by Ruth Taplin) and it appears
RM is now following a similar trajectory path.
Masatoshi Kuratomi of the Development Bank of Japan (DBJ) describes some of the
emerging strategies Tokyo is adopting to tackle the new RM challenges. He
details how the state is using government institutes such as the DBJ to cope
with the RM transition phase. For example, private financial institutions and
the DBJ are assisting small and medium-size enterprises to deal with the risks
of restarting bankrupt businesses by utilizing their IP for bridging loans and
leverage purposes.
Various chapters of the book convincingly argue that both Japan and Europe must
substantially change their approach to RM if companies want to prosper in an
increasingly complex global market. The heightened awareness of risk in both
Japan and Europe is also creating a greater demand, and lucrative
opportunities, for insurance services that match these newly emerging needs.
While banking has already undergone a substantive metamorphosis in the last
decade, insurance has somewhat lagged behind and is only now adapting to the
new realities of the shifting global landscape.
Underlining the financial sector's interest in this cutting-edge book, it was
launched at Lloyds of London on November 1 with a keynote speech delivered by
Lord Levene, chairman of the UK insurance giant Lloyds. He emphasized the
importance of addressing emerging risk and how this was changing the insurance
industry. Some of the authors, including Professor Gerry Dickenson, vice
secretary general of the Geneva Association (an international non-profit
research organization), and Taplin, also spoke about the importance of
developments occurring in Tokyo, Washington and London and their wider
implications on international markets.
Globalization is transforming risk management from a once fairly narrowly
focused specialty, traditionally anchored in insurance, into an important
multi-disciplined field, spanning international law, finance, intellectual
property rights, technology, engineering, intercultural studies and beyond.
This comprehensive work also examines RM standards, emerging risks, the
managing of risks in a variety of sectors (including marketing, banking,
venture capital, insurance and patents), and the way RM has evolved within a
range of organizations.
The book also reminds us that planet Earth is awash with a vast spectrum of
domestic and international risks that can seriously affect business. Local
threats encompass everything from a natural disaster such as Hurricane Katrina
to man-made catastrophes such as the Chernobyl meltdown. On the global front
there are a host of even more potential destructive threats, such as a pandemic
caused by bird flu, AIDS, global warming, a herbicide-resistant superweed
spawned from genetic-modification technology, and terrorism, among other
things. The breakneck speed of the global bandwagon is amplifying the potential
danger, adding another dimension to risk management.
You may have thought that risk management was a dull subject, but reading this
thought-provoking collection of essays will probably make you reconsider.
Risk Management and Innovation in Japan, Britain and the United States,
edited by Ruth Taplin. Routledge October 2005. ISBN 0-415-36806-5. Price
US$112, 182 pages including index.
J Sean Curtin is a writer, broadcaster and academic specializing in
Japan.
becoming imperative to understand the variations in risk taken at a
cultural level, which affect business decisions profoundly," she said.
