Quality, Risk and the Taleb Quadrants

Abstract

The definition and the management of quality has evolved and assumed a variety of approaches, responding to an increased variety of needs. In industry, quality and its control has responded to the need of maintaining an industrial process operating as "expected", reducing the process sensitivity to uncontrolled disturbances (robustness) etc. By the same token, in services, quality has been defined as "satisfied customers obtaining the services they expect". Quality management, like risk management, has a general negative connotation, arising from the consequential effects of "non-quality". Quality, just as risk, is measured as a consequence resulting from factors and events defined in terms of the statistical characteristics that underlie these events. Quality and risk may thus converge, both conceptually and technically, expanding the concerns that both domains are confronted with and challenged by. In this paper, we analyze such a prospective convergence between quality and risk, and their management. In particular we emphasize aspects of integrated quality, risk, performance and cost in industry and services. Throughout such applications, we demonstrate alternative approaches to quality management, and their merging with risk management, in order to improve both the quality and risk management processes. In the analysis we apply the four quadrants proposed by Nassim Taleb for mapping consequential risks and their probability structure. Three case studies are provided, one on risk finance, a second one on risk management of telecommunication systems and a third one on quality and reliability of web based services.