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Risky Business: How Data Analytics Can Help

August 28, 2012 | Renee Boucher Ferguson | Strategy

Kathleen Long (Montage Analytics), interviewed by Renee Boucher Ferguson.

A socio-cybernetician and behavioral scientist, Dr. Kathleen Long, CEO of Montage Analytics, is taking on operational risk the big, unwieldy, nearly undetectable kind known as black swans (and the perhaps more well known type of operational risk too, like risky business practices or employee fraud). Dr. Long has combined her training in behavioral science with Bayesian network design to help organizations better understand and mitigate operational risk

This isn’t an easy undertaking. Part of the problem, according to Dr. Long, is that not everyone knows how to define operational risk (if you can’t define it, you can’t guard against it). At the same time, the risk landscape is changing so fast that what happened yesterday is no longer a marker for what might happen tomorrow.

“We are living in unprecedented times. You can’t say the past is a reliable predictor of the future,” says Dr. Long. “Too many events happen that are black swans that come out of the blue Bernie Madoff, 9/11. Things have changed dramatically. And the fact that we are living in an increasingly globalized and networked world means that even small events happening somewhere on the other side of the world can quickly cascade around the globe and affect us in places we didn’t expect.

In a conversation with Renee Boucher Ferguson, a researcher and contributing editor at MIT Sloan Management Review, Dr. Long discussed the changing risk landscape and how big data and behavioral science can help.

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