Tag Archives: Risk Management

Value is created by embracing risk effectively

The latest briefing from the real ‘Risk Doctor’, Dr David Hillson #75: RESOLVING COBB’S PARADOX? starts with the proposition: When Martin Cobb was CIO for the Secretariat of the Treasury Board of Canada in 1995, he asked a question which has become known as Cobb’s Paradox: “We know why projects fail; we know how to prevent their failure – so why do they still fail?” Speaking at a recent UK conference, the UK Government’s adviser on efficiency Sir Peter Gershon laid down a challenge to the project management profession: “Projects and programmes should be delivered within cost, on time, delivering the anticipated benefits.” Taking up the Gershon Challenge, the UK Association for Project Management (APM) has defined its 2020 Vision as “A world in which all projects succeed.” The briefing then goes on to highlight basic flaw in these ambitions – the uncertainty associated with various types of risk. (Download the briefing from: http://www.risk-doctor.com/briefings)

Whilst agreeing with the concepts in David’s briefing, I don’t feel he has gone far enough! Fundamentally, the only way to achieve the APM objective of a “world in which all projects succeed” is to stop doing projects! We either stop doing projects – no projects – no risks – no failures. Or approximate ‘no risk’ by creating massive time and cost contingencies and taking every other precaution to remove any vestige of uncertainty; the inevitable consequence being to make projects massively time consuming and unnecessarily expensive resulting in massive reductions in the value created by the few projects that can be afforded.

The genesis of Cobb’s Paradox was a workshop focused on avoidable failures caused by the repetition of known errors – essentially management incompetence! No one argues this type of failure should be tolerated although bad management practices mainly at the middle and senior management levels in organisations and poor governance oversight from the organisation’s mean this type of failing is still all too common. (for more on the causes of failure see: Project or Management Failures )

However, assuming good project management practice, good middle and senior management support and good governance oversight, in an organisation focused on maximising the creation of value some level of project failure should be expected, in fact some failure is desirable!

In a well-crafted portfolio with well managed projects, the amount of contingency included within each project should only be sufficient to off-set risks that can be reasonably expected to occur including variability in estimates and known-unknowns that will probably occur. This keeps the cost and duration of the individual projects as low as possible, but, using the Gartner definitions of ‘failure’ guarantees some projects will fail by finishing late or over budget.

Whilst managing unknown-unknowns and low probability risks should remain as part of the normal project risk management processes, contingent allowances for this type of risk should be excluded from the individual projects. Consequently, when this type of risk eventuates, the project will fail. However, the effect of the ‘law of averages’ means the amount of additional contingency needed at the portfolio level to protect the organisation from these ‘expected failures’ is much lower than the aggregate ‘padding’ that would be needed to be added to each individual project to achieve the same probability of success/failure. (For more on this see: Averaging the Power of Portfolios)

Even after all of this there is still a probability of overall failure. If there is a 95% certainty the portfolio will be successful (which is ridiculously high), there is still a 5% probability of failure. Maximum value is likely to be achieved around the 80% probability of success meaning an inevitable 20% probability of failure.

Furthermore, a focus on maximising value also means if you have better project managers or better processes you set tighter objectives to optimise the overall portfolio outcome by accepting the same sensible level of risk. Both sporting and management coaches understand the value of ‘stretch assignments’ – people don’t know how good they are until they are stretched! The only problem with failure in these circumstances is failing to learn and failing to use the learning to improve next time. (For more on this see: How to Suffer Successfully)

The management challenge is firstly to eliminate unnecessary failures by improving the overall management and governance of projects within an organisation. Then rather than setting a totally unachievable and unrealistic objective that is guaranteed to fail, accept that risk is real and use pragmatic risk management that maximises value. As David points out in his briefing: “Projects should exist in a risk-balanced portfolio. The concept of risk efficiency should be built into the way a portfolio of projects is built, with a balance between risk and reward. This will normally include some high-risk/high-reward projects, and it would not be surprising if some of these fail to deliver the expected value.”

Creating the maximum possible value is helped by skilled managers, effective processes and all of the other facets of ‘good project management’ but not if these capabilities are wasted in a forlorn attempt to ‘remove all risk’ and avoid all failure. The skill of managing projects within an organisation’s overall portfolio is accepting sensible risks in proportion to the expected gains and being careful not to ‘bet the farm’ on any one outcome. Then by actively managing the accepted risks the probability of success and value creation are both maximised.

So in summary, failure is not necessary bad, provided you are failing for the ‘right reason’ – and I would suggest getting the balance right is the real art of effective project risk management in portfolios!

Stakeholders and Risk

Probably the biggest single challenge in stakeholder communication is dealing with risk – I have touched on this subject a few times recently because it is so important at all levels of communication.

Projects are by definition uncertain – you are trying to predict a future outcome and as the failure of economic forecasts and doomsday prophets routinely demonstrate (and bookmakers have always known), making predictions is easy; getting the prediction correct is very difficult.

Most future outcomes will become a definite fact; only one horse wins a race, the activity will only take one precise duration to complete. What is uncertain is what we know about the ‘winner’ or the duration in advance of the event. The future once it happens will be a precise set of historical facts, until that point there is always a degree of uncertainty, and this is where the communication challenge starts to get interesting……

The major anomaly is the way people deal with uncertainty. As Douglas Hubbard points out in his book the Failure of Risk Management: “He saw no fundamental irony in his position: Because he believed he did not have enough data to estimate a range, he had to estimate a point”. If someone asks you what a meal costs in your favourite restaurant, do you answer precisely $83.56 or do you say something like “usually between $70 and $100 depending on what you select”? An alternative answer would be ‘around $85’ but this is less useful than the range answer because your friend still needs to understand how much cash to take for the meal and this requires an appreciation of the range of uncertainties.

In social conversations most people are happy to provide useful information with range estimates and uncertainty included to make the conversation helpful to the person needing to plan their actions. In business the tendency is to expect the precisely wrong single value. Your estimate of $83.56 has a 1 in 3000 chance of actually occurring (assuming a uniform distribution of outcomes in a $30 range). The problem of precisely wrong data is discussed in Is what you heard what I meant?.

The next problem is in understanding how much you can reasonably expect to know about the future.

  • Some future outcomes such as the roll of a ‘true dice’ have a defined range (1 to 6) but previous rolls have absolutely no influence on subsequent rolls, any number can occur on any roll.
  • Some future outcomes can be understood better if you invest in appropriate research, the uncertainty cannot be removed, but the ‘range’ can be refined.

This ‘know-ability’ interacts with the type of uncertainty. Some future events (risks) simply will or won’t happen (eg, when you drop your china coffee mug onto the floor it will either break or not break – if it’s broken you bin the rubbish, if it’s not broken you wash the mug and in both situations you clean up the mess). Other uncertainties have a range of potential outcomes and the range may be capable of being influenced if you take appropriate measures.

The interaction of these two factors is demonstrated in the chart below, although it is important to recognise there are not absolute values most uncertainties tend towards one option or the other but apart from artificial events such as the roll of a dice, most natural uncertainties occur within the overall continuum.

Stakeholders and Risk - Risk Matrix

Putting the two together, to communicate risk effectively to stakeholders (typically clients or senior managers) your first challenge is to allow uncertainty into the discussion – this may require a significant effort if your manager wants the illusion of certainty so he/she can pretend the future is completely controllable and defined. This type of self-delusion is dangerous and it’s you who will be blamed when the illusion unravels so its worth making the effort to open up the discussion around uncertainty.

Then the second challenge is to recognise the type of uncertainty you are dealing with based on the matrix above and focus your efforts to reduce uncertainty on the factors where you can learn more and can have a beneficial effect on future outcomes. The options for managing the four quadrants above are quite different:

  • Aleatoric Incidents have to be avoided (ie, don’t drop the mug!)
  • Epistemic Incidents need allowances in your planning – you cannot control the weather but you can make appropriate allowances – determining what’s appropriate needs research.
  • Aleatoric Variables are best avoided but the cost of avoidance needs to be balanced against the cost of the event, the range of outcomes and your ability to vary the severity. You can avoid a car accident by not driving; most people accept the risk and buy insurance.
  • Epistemic Variables are usually the best options for understanding and improvement. Tools such as Monte Carlo analysis can help focus your efforts on the items within the overall project where you can get the best returns on your investments in improvement.

Based on this framework your communication with management can be used to help focus your efforts to reduce uncertainty within the project appropriately. You do not need to waste time studying the breakability of mugs when dropped; you need to focus on avoiding the accident in the first place. Conversely, understanding the interaction of variability and criticality on schedule activities to proactively managing those with the highest risk is likely to be valuable.

Now all you have to do is convince your senior stakeholders that this is a good idea; always assuming you have any after the 21st December!*

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*The current ‘doomsday’ prophecy is based on the Mayan Calendar ending on 21st December 2012 but there may be other reasons for this:

Stakeholders and Risk Myan Prediction

Credit, Trust and Emotions

Last night we attended the Deakin University, Richard Searby Oration, delivered by Dr Guy Debelle, Assistant Governor (Financial Markets), Reserve Bank of Australia. His topic was: Credo et Fido: Credit and Trust.

The 2012 Oration explored the importance of credit and trust within the financial system and how the breakdown in trust post 2007 and the Global Financial Crisis (GFC) is severely hampering the global recovery.

Debelle’s hypothesis is that there is no credit without trust because there is always asymmetrical information in a loan transaction, the borrower always knows more about his/her/its financial situation and intentions than the lender and trust is needed to bridge this knowledge gap and allow the loan to be made.

This is as true of a depositor lending to a financial institution as it is of a bank lending to a borrower or importantly one financial institution lending to another institution. When trust breaks down, the lending process slows up or stops altogether. For more on the value of trust see: WP1030_The_Value_of_Trust

However, trust implies risk, the root cause of the GFC was overconfidence, leading to lax lending practices, supported by a lack of effective due diligence, leading to a chronic underpricing of risk. This allowed highly unethical, if not criminal practices to develop exponentially with institutions offloading risk to other institutions at a fraction of the real price. This complacency and ‘lazy trust’ allowed vast ‘bubbles’ of underpriced risk to develop across the whole financial sector. When the finance system was eventually forced to take a severe look at its situation, trust evaporated, credit dried up and the GFC destroyed value around the world.

The sovereign states (ie, governments) as lenders of last resort were in many cases unable to counterbalance the situation because trust in their ability to repay debt also evaporated. Pricing risk requires a reasonable degree of confidence that the parameters of the ‘unknown’ are knowable and a reasonable probability can be assigned to a defined risk exposure. Post GFC the breakdown of trust and confidence in financial markets has lead to uncertainty. When lenders ‘don’t know’ what the risk is they cannot price the risk, set a reasonable premium and use the information to strike a loan rate. If lender cannot set an interest rate for a loan, there is no loan (or the rates are exorbitantly high and the loan periods very short).

On-going banking scandals in Europe and the USA are continuing to erode trust and slow the rebuilding, despite money supply being expanded by the central banks. Having money is no good if you cannot trust anyone to lend it to.

The thread of argument that can be drawn from the above is that access to the credit needed to fund economic growth is based on a large proportion of a society having enough confidence in their financial systems for a reasonable degree of pragmatic trust to be extended by lenders to borrowers (and the borrowers having sufficient confidence in the situation and system to seek loans). This is as much a function of the underlying emotional settings within a society as the actual facts of the situation.

Australia is an interesting example. The GFC had minimal overall effect on the economy due to much tighter fiscal and banking policies, supported by swift government action. The current situation is also good with relatively low debt and the Reserve Bank has significant options open to keep the economy growing.

The overall strength of the economy was outlined in a speech entitled ‘The Glass Half Full’ given by Glenn Stevens’, Governor of the Reserve Bank of Australia (RBA), in his address to the American Chamber of Commerce (SA) AMCHAM Internode Business Lunch held in Adelaide on the 8 June 2012 (see: http://www.rba.gov.au/speeches/2012/sp-gov-080612.html).

One of the key charts presented by Stevens shows the inflation adjusted per capita GDP in Australia has hardly missed a beat – the GFC had a flattening effect but overall business conditions for the last 5 years have remained basically the same and are improving.

GDP = Gross Domestic Product and is directly correlated to the spending power per person (compounded by the growth in the Australian population). The only significant change highlighted in Steven’s report was a shift from an unsustainable growth in personal borrowings back towards a more sustainable savings rate which under any normal circumstance would be seen as good economic sense, particularly given the disasters in places like Ireland, Spain and Iceland caused by excessive borrowing.

So given the basically solid performance of the Australian economy, one would expect a similar trend in business confidence?? Unfortunately this is not the case:

A survey of business confidence by DBM Consultants shows confidence crashed in the period between 2007 and 2009 and continues to ‘flat-line’ with the vast majority of businesses being concerned about the economy. This flows through into low expectations for increasing employment and taking on borrowings (see: www.dbmconsultants.com.au).

The question is why is there such as big disconnect between the financial facts as presented by the RBA and the emotional distrust expressed by business in the DBM report?

My feeling is the key driver is the almost unrelenting stream of negative reporting in the press focusing on ‘bad news’ stories such as plant closures rather than good news stories such as the overall growth in employment (even in the manufacturing states such as Victoria), supported by a similar campaign by the federal opposition for short term political gain. This combination of unrelenting negativity will undoubtedly lower the level of optimism in the community (shown by numerous surveys) and lower the levels of trust in the government which as the ‘lender of last resort’ flows through into the financial and business communities.

Given the press appear to believe bad news sells papers and the opposition has a vested interest in winning the next election, both legitimate objectives, one wonders what needs to happen to start the shift in confidence highlighted as essential in Dr Debelle’s oration? The belief highlighted in the DBM report above has to be having a direct effect on the rate of growth in the economy because businesses are not investing, not training staff and not employing at the levels they could if there was more confidence – to an extent, the emotions are self-fulfilling.

As individuals we cannot do much at a national or international level, but we can learn from the wider world. When dealing with your team and/or communicating with stakeholders a proper balance is needed between achievements and issues. Focusing only on bad news and you will damage future prospects – unrelenting negativity is likely to be self-fulfilling; whilst unfounded optimism is a recipe for disaster if you ignore prudent good practice.

Project Assurance

Effective project and program governance requires a carefully measured balance between prudent and effective risk taking, allowing skilled project teams the flexibility to tailor and improve processes to enhance success and effective surveillance to ensure the organisation’s objectives are being achieved.

An excessive focus on ‘due process’ stifles innovation and improvement and can easily lead to ‘process induced failure’ where every one focuses on producing the correct document in preference to dealing with the information contained in the document… There is absolutely no point in being able to say that ‘every risk that adversely affected the project had been identified in the risk register’, if the risks could have been avoided by proactive management.

Good project management, good business management and good governance requires appropriate and timely action to mitigate or remove risks that can sensibly be managed, and recognition of the fact that the decision to take action is risky because there is no certainty the risk being mitigated would have occurred anyway: there is always a probability a risk won’t occur! Similar issues requiring balanced decision making occur across the full spectrum of project and program management.

Balancing the cost of action against the possible cost of inaction requires good business judgement; the definition of ‘good judgement’ being, ‘you are right more often than you are wrong’; not the ridiculous expectation of perfect foresight (it does not exist), nor systems that are biased in favour of ignoring preventative actions until it is too late.

The role of project surveillance systems should be focused on this type of issue assuring the organisation’s senior management and other stakeholders that their project and program management teams are making the best decisions to protect and enhance the overall value of the projects and programs to the organisation. ‘Due process’ is important, but only to the extent it either assists the decision making process or provides information that is required by law or regulation.

Our new White Paper ‘Proactive Project Surveillance’ looks at the different types of review and the way they can be structured to both assist the projects and programs being reviewed to generate value for the organisation whilst providing assurance to the organisation’s executives and stakeholders that the projects and programs are being managed effectively.

You can download the White Paper from: http://www.mosaicprojects.com.au/WhitePapers/WP1080_Project_Reviews.pdf

The flaw of averages

The flaw of averages defined in a book of the same name by Sam L. Savage, states in effect, any plan based on average assumptions is wrong on average! http://www.flawofaverages.com/

However, every duration estimate, cost estimate, risk impact and other estimate our project plans are based on an ‘average’ or ‘expected value’ derived from past experience. And as naturalist Stephen Jay Gould commented, our culture encodes a strong bias either to neglect or ignore variation. We tend to focus instead on measures of central tendency, and as a result we make some terrible mistakes, often with considerable practical import.

The flaw of averages ensures plans based on a single average value that describes an uncertainty will be behind schedule and over budget! A typical example from the book looks at a stocking problem – the business is planning to import short shelf life exotic fruits with a high profit margin, the marketing team have analysed the market and developed a profile of likely sales. The boss looks at the distribution and demands a single figure. All the marketing team can do is take the ‘average’ expected sales and decide 500 cases per month are the most likely level of sales. Based on a profit of $100 per case the boss predicts a net profit of $50,000 per month. However, this is a very optimistic estimate, if less than 500 cases are sold, the fruits will spoil with losses of $50 per case, if more than 500 cases are required the cost of airfreighting extra cases is $150 per case resulting in a loss of $50 or the sales have to be foregone with a risk of losing the customer.

The highest possible monthly profit is $50,000 – if more or less are sold the profit reduces. On average each month more or less than 500 cases will be sold, resulting in returns lower than the estimated $50,000. The only time the predicted profit will be realised in the occasional month when exactly 500 cases are sold.

Even if the company decides not to airfreight additional cases on average the monthly profit will be less than $50,000. Without airfreight, for roughly half the time demand will exceed 500 cases but with no additional stock, profit is capped at $50,000. For the other months, sales will be less than 500 and there will be spoilage costs. Meaning on average, the monthly profit will be less than predicted!

The average is correct, the way the manger is using the average is the ‘flaw’. The same problem shown in the cartoon above, ‘on average’ the pond is only 1 meter (3ft) deep! But averages are rarely what is needed for prudent management.

To properly analyse the projected profits more in-depth analysis is needed, using techniques such as Monte Carlo analysis with the variability of sales being represented by the input probability distribution, the costs and income expected modelled in the tool and the resulting profits predicted in the output probability distribution.

The challenge is getting valid data to model. Projects are by definition ‘unique endeavours’ which means there is no pool of directly valid data; this problem is discussed in our paper The Meaning of Risk in an Uncertain World . When managing project uncertainties our basic data is uncertain!

Recognising this simple fact is a major step towards better project management. To quote George Box (Stamford University) ‘All models are wrong, some models are useful’. No model should be taken as correct, this includes schedules, cost plans, profit predictions, risk simulations and every other predictive model we use! They are never complete representations of exactly what will occur, but a successful model will tell you things you did not tell it to tell you (Jerry P. Brashear).

Building a successful model such as a useful schedule (useful schedules are useful because they are used) should go through the five stages defined by Donald Knuth:
1. Decide what you want the model to do
2. Decide how to build the model
3. Build the model
4. Debug the model
5. Trash stages 1 through 4 now you know what you really want.

And to get a large model to work, you must start with a small model that works, not a large model that does not work. If you want to understand flight what is more useful, a large highly detailed model of a Boeing Jumbo jet built out of Lego blocks that cannot fly or a simple paper aeroplane that does?

The complex Lego model may be visually impressive but is likely to be less useful in understanding a dynamic process such as flight.

The same is likely to be true for most dynamic project models. Edward Tufte says ‘Clear and precise seeing becomes as one with clear and precise thinking’, and John W. Tukey adds ‘It is far better an approximate answer to the right question, which is often vague, than the exact answer to the wrong question, which can always be made precise.’ It is dumb to be too smart!

These concepts are consistent with the PMBOK® Guide idea of ‘progressive elaboration’ and are embedded in the scheduling technique called ‘Schedule Density’ where the initial schedule is developed at ‘Low Density’ and additional detail added as needed (see more on Schedule Density).

The message from this blog is building a useful model is a skilled art, regardless of the subject being modelled (time, cost, risk). A good start is to keep the model simple, if you don’t understand how the model works how will you will be able to judge what it shows you? The model is never the truth; at best it is a useful! And its usefulness will be severely reduced if you rely on averages such as single point estimates without at least using some probability analysis. Melding the need for precision with probabilistic assessments are discussed in our paper Why Critical Path Scheduling (CPM) is Wildly Optimistic.

Whilst this post has focused on one dimension of uncertainty (time and schedule), the principles can be applied to any area of uncertainty.

New CIOB Contract for Complex Projects

The Chartered Institute Of Building (CIOB) has launched a new contract for construction and engineering projects. The CIOB Contract for Complex Projects has been written for the 21st Century. It is designed to permit the CIOB’s Guide to Good Practice in the Management of Time in Complex Projects to be put into practice.

The contract can be used for collaborative design with a building information model (BIM) and anticipates and encourages competence in the use of computerised transmission of data. It requires collaborative working in the management of risks and transparency of data used in such management.

The contract has been drafted to be used in any country and legal jurisdiction around the world to provide a means of managing the causes and consequences of delay (the single most common cause of uncontrolled loss and cost escalation in complex building and engineering projects) where the design is produced by the employer, the contractor with or without a building information model.

The key principles embedded in the contract design include:

  • It is written in plain English, suitable for both building and engineering projects and may be adopted for other types of work. It can be used for turnkey, design and build, for construction only, or for part contractor’s design, both in the UK and internationally.
  • It permits a variety of contract documents including BIM (building information model) and requires electronic communications either via a file transfer protocol or a common data environment for collaborative working.
  • The contract contains new roles for the Project Time Manager, Design Coordination Manager and Auditor, as well as the Contract Administrator and the design team.
  • It requires complete transparency in planned and as-built information in compliance with the CIOB’s Guide to Good Practice in the Management of Time in Complex Projects. It is currently the only standard form of contract available which requires a resourced critical path network, a planning method statement and progress records to a specified, quality assured standard, with significant redress for a failure to comply with the contract requirements.
  • The contractor’s schedule (or programme as it is called in other contracts) is to be a dynamic critical path network in varying densities, described and justified in a planning method statement. It is to be designed in different densities compatible with the information available, reviewed and revised in the light of better information as it becomes available, updated with progress and productivity achieved and resources used and impacted contemporaneously to calculate the effect of intervening events on time and cost (see more on Schedule Density).
  • The contractor’s schedule is not only the time control tool but also the cost control tool against which interim valuations are made and the predicted cost of the works is calculated contemporaneously permitting out-turn cost and total time prediction on a daily basis though the updated working schedule.
  • The contract contains detailed requirements for the identification and use of time and cost contingencies, defines float and concurrency and sets down rules for their use. It provides the power for the contractor to keep the benefit of any time it saves by improved progress as its own contingency, which cannot be taken away.
  • It contains a procedure for contemporaneous expert resolution of issues arising during construction. In the absence of reference to experts specified issues concerning submittal rejections and conditional approvals are deemed to be agreed, helping to avoid doubt about responsibilities and escalation of disputes. The experts used during the course of the works can be called as a witness by either party in any subsequent adjudication and/or arbitration proceedings and, in order to help to give transparency to the way dispute resolvers deal with the contract and help to make sure it functions in the way it is supposed to, the adjudicator’s decision and/or arbitrator’s award is to be a public document, unless the parties agree otherwise.

The Chartered Institute of Building would like to receive your comments and criticism on the Review Edition of the CIOB Contract by Monday, 30 July 2012. All comments will be acknowledged and taken into consideration in future review and revision of the form and its constituent standard form documents. To review the contract see: http://www.ciob.org.uk/CPC

Real Risk Management

Are risk management and gambling are two side of the same coin? Both involve investing in an attempt to tip the outcome of future events in your favour so you are better off. The similarities between the two processes were highlighted in a Melbourne Comedy Festival show presented by English eccentric and holder of 4 world records, Tim Fitzhigham see: http://www.fitzhigham.com/

Apart from being a very enjoyable hour, we learned a lot about gambling in the 18th century around the time considerable intellectual effort was being put into understanding risk by mathematicians such as Gauss, Leibnitz and Newton. Most of the recorded bets involved the considerable redistribution of wealth, often involved one Lord’s ‘man’ doing something strenuous, dangerous or both against either the clock or another Lord’s ‘man’ and generally any horses involved in the bets did not survive. However, the amounts at stake would certainly focus ones attention on anything that may tip the odds in your favour……

Whilst the show was great fun, and the comedy festival wraps up this week for another year, I’m left wondering is there is any real difference between a bet on which raindrop will reach the bottom of the window first and responding to a bank’s suggestion to fix (or un-fix) the interest rate on your home mortgage which in Tim’s view is a bet against the bank on the difference between current interest rates and those that will be being charged in 5 or 10 years time??? I guess as he pointed out, we are all gamblers, only some of us know it! Certainly Tim’s effort to recreate 10 of the most bizarre recorded bets in history makes entertaining listening and involved some big stakes and some serious risk management…… or was that a just a bet????

Either way, the historical fascination with gabling has influenced modern language, bets were recorded in ‘Gentleman’s Club Betting Books’ – the origin of the term Bookie and Book Maker, and the original meaning of the term ‘stakeholder’ refers to the independent, trusted person who held the ‘stakes’ during the course of the bet.