We can learn a lot about risk management from Jeff Bezos: Risk and Insurance

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John (Jack) Hampton is a professor of business at Saint-Pierre University, a faculty member at the International School of Management (Paris) and a member of Risk Insider at Risk and Insurance magazine where he was named All Star 2018. He was executive director of the Risk and Insurance Management Society (RIMS), dean of business schools at Seton Hall and Connecticut State Universities, and provost of the College of Insurance and SUNY Maritime College in New York.

I’m always looking for a reason to visit Florida in the dead of winter. Also, I have great respect for SCORE, a non-profit organization with local chapters that helps entrepreneurs start new businesses.

I jumped at an invitation from the Manatee and Sarasota SCORE Chapter to speak at a rally in January.

The presentation was titled “A Risk Management Perspective on Jeff Bezos.” I started by asking “How well do we know the man and his company?” Here is a try.

1. Bezos has the same name as his father. Right wrong

2. He was a poor student in school. Right wrong

3. He had no idea what he wanted to do when he started Amazon. Right wrong

4. He has a balanced work life. Right wrong

5. His philosophy is “reach for the stars”. Right wrong

6. His salary offers a lavish lifestyle. Right wrong

7. In 2002, his company made a big profit. Right wrong

The answers are below, but first consider the importance of question number three. If we don’t know where we are going, how will we know when we will arrive?

By using a different wording, did Bezos have a business model for Amazon? Was he ready to develop a product or service, identify a market for it, and create a competitive link between the product and the market?

A business model is its particular genius:

  • Product or service. He began by selling books published by others, buying them at wholesale prices and distributing them at retail. No fabrication or other expertise was needed.
  • Marlet. People were buying books on Amazon in the late 1990s. A few years later, they would use its distribution system to buy everything else.
  • Creativity and innovation. He understood the importance of fast and accurate delivery, working with an existing network of UPS, FedEx and the Post Office. He built an electronic system that allowed people to shop around the clock from home. He collected the money on the date of the sale and delivered the item within a day or two.

This, in simple terms, is Amazon’s risk management model. Seize the opportunity. Mitigate or avoid risks.

So, what did you do in the true-false quiz?

All answers are wrong.

Same name as father? No. Theodore Jorgensen was his biological father. Bezos changed his last name when he was adopted at age 4.

Poor student? No. He was valedictorian in high school.

No idea of ​​his activity? No. As already discussed, he had a dynamite business model.

A balanced professional life? No. He expected himself and his key employees to regularly work 60 hours or more per week.

Philosophy? “Minimize your regrets.” Do everything to succeed. If you fail, move on.

Lavish lifestyle? Yes, but not his $80,000 annual salary.

A big profit in 2002? No. Amazon was preparing to file for bankruptcy if necessary to hold back creditors. Another story a year later when the company made a profit of $400 million.

Whatever else we know about Bezos, he shows us how to minimize our regrets. The greater the risk, the more satisfying the success. Be resilient in the face of uncertainty. Have a backup plan if things don’t work out.

In my presentation in Florida, I gave Mr. Bezos marks for his business model.

#1. Desired and products or services: A

#2. Reliable broadcast: A

#3. Effective marketing: A

#4. Capital management: VS

The “C” grade is assigned because of the cash flow problem of 2002. Entrepreneurs must manage their start-up and growth without flirting with a liquidity crisis.

Overall, Bezos receives an A minus in risk management. Class valedictorian? I’m afraid he doesn’t like this note.

Tonight my wife and I are planning to watch Yellowstone Season 4 using Amazon Prime. Tomorrow we are expecting two packages shipped by Amazon. If we are banned by Mr. Bezos, we may need to play down our regrets. We could put ourselves on a limited diet of Netflix and shop in person at Macy’s.

It might not work. Netflix streams its videos using Amazon Web Services, and Mr. Bezos may be considering acquiring and shutting down Macy’s. &

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