14 October 2012

Crisis Readiness: Future of Risk Response...

One of the key components of effective Operational Risk Management is a robust Crisis and Incident Readiness Response Team.  This team shall have practiced and exercised multiple scenarios over the course of their training together.  Why?  The ability to adapt on the fly regardless of the kind or type of incident is the core of what OPS Risk professionals are able to do, time and time again.  The more unknowns that are encountered in any space of time, requires the ability to Observe, Orient, Decide and Act.

Yet this is not so much about the use of the OODA Loop or any other process in effectively adapting to your new and rapidly changing environment.  It is about having the right sensors and early warning capabilities in place to detect and to deter the potential for new threats and new vulnerabilities, that may disrupt your mission.

Why do you read about Global 500 organizations that have seen their stock price erode in a day, week or month due to the ineffective response to a crisis incident?  In many cases, it is a simple fact.  The Crisis and Incident Response Team was caught in a scenario that they had never imagined.  An unfolding situation that they had never thought of and simply didn't plan for because it's likelihood was just too low.  This blog has talked about this before and it deserves repeating that exercising for the low likelihood and high impact events is where you need to spend most of your time.

The one and one hundred year events are no longer the case.  They are one in fifty or less.  Just ask your property and casualty insurance carrier about how their actuarial quants are thinking about this very topic.  Whether is it global climate change or unregulated nuclear power industries in emerging nations, the low likelihood and high impact events are becoming more of a risk.

So what is the answer?  To begin, you must first start the culture change and mind set shift to the future and to your own Strategic Foresight Initiative.  Looking into the future is not exactly the exercise.  Pick a point in time, five years, ten or twenty-five years into the future.  Select a scenario that you can't even fathom is a possibility of actually coming true that will impact your organization.  Then start your own "Backwards from Perfect" strategic foresight initiative.  What this process will do, is to get all the focus on what you still need to accomplish between now and then to get yourself into a position so that your people, systems and organization will be able to withstand the scenario incident.  Welcome to Global Enterprise Business Resilience.
Across every sector of society, decision-makers are struggling with the complexity and velocity of change in an increasingly interdependent world. The context for decision-making has evolved, and in many cases has been altered in revolutionary ways. In the decade ahead, our lives will be more intensely shaped by transformative forces, including economic, environmental, geopolitical, societal and technological seismic shifts. The signals are already apparent with the rebalancing of the global economy, the presence of over seven billion people and the societal and environmental challenges linked to both. The resulting complexity threatens to overwhelm countries, companies, cultures and communities.  Global Risks 2012 Seventh Edition
What if you happen to be a Non Governmental Organization (NGO)?  What are some of the risks that may impact you from a "Geopolitical" perspective that today have a high likelihood?

  • Global Governance Failure
  • Terrorism
  • Failure of Diplomatic Conflict Resolution
  • Pervasive Entrenched Corruption
  • Critical Fragile States
  • Entrenched Organized Crime
  • Widespread Illicit Trade

Crisis impact will be specific to your particular stakeholder group.  These will be higher or lower depending on whether you are a:

  1. NGO
  2. Business
  3. Government
  4. International Organization
  5. Academia

There are however, three main cross cutting observations by all of the these stakeholders from the Global Risks 2012 report:

  • Decision-makers need to improve understanding of incentives that will improve collaboration in response to global risks
  • Trust, or lack of trust, is perceived to be a crucial factor in how risks may manifest themselves. In particular, this refers to confidence, or lack thereof, in leaders, in the systems which ensure public safety and in the tools of communication that are revolutionizing how we share and digest information
  • Communication and information sharing on risks must be improved by introducing greater transparency about uncertainty and conveying it to the public in a meaningful way.

The way that the global citizen decides to digest information in five or twenty years will be different than it is today.  The world has already started to see this with the proliferation of mobile smart phone technologies, cameras, and knowledge systems networks such as FrontlineSMS and Ushahidi.  Do you really believe that CNN and AlJazeera will be the source of truth in the next two decades?  Social Media is here to stay and the only reason that formal news organizations will exist is to validate and verify.

Operational Risk Management and Crisis Readiness shall continue to be one of the most dynamic and challenging places for global enterprises for years to come...

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