Peter L. Bernstein wrote the book on risk (at least one of them -- Against the Gods: The Remarkable Story of Risk ).

So, it's worth noting when he writes a column that gets to "the very root of what we mean by that four-letter word 'risk' " in the context of our present financial debacle. Those involved in fomenting the subprime credit crisis either do not understand what risk management is, applied it incorrectly (i.e. managed the wrong risks), or ignored the process altogether, he suggests.

"Risk management is fundamentally different from managing volatility, which is how many investors view it," Bernstein writes in his Sunday, June 22, New York Times column. "Volatility is often a symptom of risk but is not a risk in and of itself. Volatility obscures the future but does not necessarily determine the future. "Effective risk management starts with the recognition that any forecast can be wrong, then weighs the consequences of being wrong. Only then can we decide whether to make a bet, whether to hedge that bet and how to execute the hedge if needed."

Maybe it's time to get back to basics...