But as recent remarks from some prominent U.S. and U.K. banking regulators suggest, overly complex rules (and the systems they subsequently impose) often come with unintended consequences that warrant a trip back to the drawing board.
The folks over at the International Organization for Standardization 31000 Risk Management Standard LinkedIn message board delved into one of the potential side effects associated with rigid risk management when one member asked: Does concern for risk inhibit innovation?
The general idea put forth by some commenters was that creativity often gets thrown to the wayside by many firms because there are too many unknowns associated with new tactics or systems.
"[Concern for risk] should stimulate further research and engineering into the unknown," one commenter noted. "However, once the masses get wind of generalizations, the intellectual proletariat, which is society as a whole rather than individually, is forced back down the evolutionary curve."
Still, others commenters argued, if properly executed, risk management and innovation were not mutually exclusive.
"If you look at tools used by innovators or by traditional risk managers, in essence, they are the same," one commenter wrote. "Sometimes they carry different words. But if you need to innovate, there's nothing wrong to use 'what if?', 'success modes and effects analysis', or 'common cause analysis.'"
And some participants were quick to point out there were just as dire consequences associated with dialing back on risk management for the sake of innovation.
"If we have no means of credibly predicting the unintended consequences of a course of action, then I believe it is false to claim to have conducted a professional risk assessment with respect to societal risk," one commenter posted. He went on to cite genetically modified crops as an example of innovation gone awry, writing they caused "super weeds and toxin-resistant insects to emerge" and led to an increased use of pesticides.
Another commenter dutifully noted, "It appears that an absence of concern or an absence of ongoing review and monitoring are the threats."
Do unyielding concerns for risk and stringent risk management systems inhibit innovation? Let us know in the comments section below.