Why not “constructive transparency”?
Sunday, 6 January, 2013 Leave a comment
I recently came across a very interesting article that brought to my attention a phrase I hadn’t come across before: constructive ambiguity.
Isn’t that an oxymoron???
The article is here and it touches upon a topic and writers I have written about before in relation to business as war. If you like you economics with a social conscience and a philosophical perspective Ashwin’s your man.
“The interaction between the market participants, and for that matter between the market participants and the regulators, is not a game, but a war.”
However, in this article ‘constructive ambiguity’ was being used in terms of preventing moral hazard within a regulatory regime.
That’s when it struck me! Why not constructive transparency?
After all, ambiguity is a source of complexity and necessitates the excessive complexity associated with regulation – intended to improve customer value but [as an unintended consequence(?)] a costly paradox – whereas, transparency acts as a form of self-regulation.
With the appropriate tools, the RESILIENCE of ‘that which is being regulated’ can monitored be monitored and managed within pre-determined levels.
With a tool that can identify multiple inter-connections [causal relationships] within a complex system – such as a bank – and measure the number, nature and integrity of interactions within entire ecosystems, systems, networks, sub-systems, processes, etc. it would be track multiple counter-party arrangements.
But, of course, such a tool would need to have been rigorously tested to ensure it is fit for purpose, be ‘tamper proof’, objective, operate in real-time and commercially sensitive information remain, assuredly, confidential.
Oh well, I guess that means, Ontonix software may hold a very important key!
I reckoned so when I met Dr Jacek Marczyk and listened intently to what he had to tell me about what I didn’t know about risk. It was considerably more than I ever thought! That was then, this is now.
I touched upon how to facilitate transparency, without losing competitive advantage, in this article from 2010.
Regrettably, not much has changed in 2 years. Except the timescale to start the process of building systemic resilience is even more pressing.
I suppose there aren’t too many, sufficiently well-informed, Senior Regulators, Central Bank Governors reading my wee blog but the truth of the matter is that change on the kind of scale that is required is a source of such uncertainty that collapse (refer Jared Diamond/Joseph Tainter in previous articles) is the only means by which it can shed the excessive complexity that its ambiguity begets!
UNLESS, of course, someone (like me, for example) has a strategy to build systemic resilience [i2o] from the bottom up. And, in the process, hand an unassailable competitive advantage to Risk Leaders within their own marketplace [ecosystem] who want to participate in and contribute to a more resilient, sustainable, world.
The problem is the same as it was when Einstein spoke of what he would give for it and it is the solution. But, as Machiavelli, correctly, identified, it is “hard to recognise”. They both looked but lacked the tools…we have the tools but the ‘baggage’ of “conventional wisdom”, more realistically, engrained belief systems or plain old self-interest, to hold us back!!!
THE QUESTION FOR INSURERS AND BANKERS should be:
Why rate RISK on [subjective; probability-based; reflexive] predictions of the unpredictable, when it is the business systems’ RESILIENCE: ability to absorb the impact of possible and probable future events, that can be [objectively] measured, monitored, ‘scenario-tested’, rated and managed (if necessary in real-time), that will determine the extent of any resultant loss?
This is the Ontonix on-line tool for:
DEMONSTRATIONS OF THE DEPTH OF ANALYSES ACHIEVABLE. We provide a ‘summary’ in the form of a complexity breakdown and resilience rating for each system.