The Nature of Risk Quiz

Internationally recognized Risk Manager David X Martin wrote The Nature of Risk to help readers face one of modern life’s most difficult tasks — confronting risk. A short, charmingly illustrated, easy-to-understand book free of complicated theories or formulas, The Nature of Risk relies instead on a simple story that features a cast of familiar, forest-dwelling animals, each of which embodies a different approach to risk management.

At least one of these animals will seem familiar to every reader, whether or not they’ve ever given any thought to risk management. Then, as the story unfolds, the strengths and weaknesses of each animal’s approach will be revealed through a series of “natural” tests. Finally, at the conclusion of the story, readers will find a short review section designed to help them frame their first attempts at managing risk — with or without professional help.

Before reading the book, take the short quiz below to see if you can match the animals to their natural risk profiles, and while you’re doing that, think about which animal — or animals — approach risk management the way you do:

Animals

1. Red Squirrel
2. Rabbit
3. Bear
4. Gray Squirrel
5. Beaver
6. Deer
7. Fox
8. Turtle

Risk Profiles

a. You understand the need for multiple exit strategies.
b. You always follow the herd.
c. You keep all your acorns in one tree.
d. You are always on the run.
e. You reshape the world you live in order to manage risk.
f. You store your seeds and nuts in different places.
g. Your idea of safety is keeping your head in your shell.
h. You think you’re too big and strong to be at risk.

Answers: 1c, 2d, 3h, 4f, 5e, 6b, 7a, 8g

If, for example, you identified the deer as the animal with the risk management approach closest to your own — i.e., you always follow the herd — then you have a lot of company. How many times have you followed the crowd, selling when the market is near the bottom, and buying only after the bubble is inflated? If that’s true you might think about making your own decisions every once in a while — or paying someone to make them for you.

For more information on David X. Martin, please visit davidxmartin.com.