Contagion in the house of cards: How stable is the Euro – Sterling – Dollar?


OK so I have become somewhat “bogged down” in complexity within the financial markets and banking in recent times so for anyone who was hoping for a good laugh…you got the wrong space! The reason for this is simple. Because it is so COMPLEX, so precariously placed, the implications for each and every one of us are huge AND YOU SIMPLY DO NOT KNOW WHO YOU CAN TRUST TO TELL YOU THE TRUTH ABOUT IT.

That is precisely why I have immersed myself, in recent months, in understanding WHAT COMPLEXITY IS. In a recent blog I referred to complexity as a form of cancer and I am not about to apologise for that now.

Of course I want to get back on track with my plans in relation to: building the template for THE robust business “value network”; delivering complexity services & consulting for business; insurer/bank portfolio audit and analysis; risk prevention product & services development;  integrating complexity management into insurance products – emphasis upon competitive advantage through transparency and sustainable stakeholder value; developing complexity solutions for IT/communication systems; developing complexity-based software and financial data solutions…

…and it may yet transpire that alerts such as this – that are unique as they are quantitative and model-free – reinforce the message that complexity analyses at financial and operational levels can deliver genuine and sustainable competitive advantage.

I firmly believe that mere survival in the, networked, new modernity already requires a new understanding and interpretation of the function of “risk management”.     

Recent Ontonix analysis of the 27 EU economies reveals a low 2-star rating. The high density of the Complexity Map – represent the inter-connections within the financial data – points to a high risk of contagion.

2-Star:

The system is highly complex and difficult to manage and control. Exposure is high as well as inefficiency. The structure of the system is fragile, hence vulnerable. It is difficult to make forecasts.EU (27 state rating)

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Complexity Facts from Ontonix


Ice melting is a common example of "entro...

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clip_image001 The amount of fitness of a system is proportional to its complexity – higher complexity implies higher fitness

clip_image001[1] The amount of functionality of a system is proportional to complexity – more complex systems can perform more functions

clip_image001[2] Each system can only reach a specific maximum value of complexity

clip_image001[3] Close to the upper limit the system is fragile – it is unwise to operate close to this limit

clip_image001[4] High complexity = difficulty in management – highly complex systems are able to perform more functions but at a price: they are not easy to manage

clip_image001[5] When a system is very complex and becomes difficult to manage, it is necessary to restructure it, add new structure or to remove excess entropy.

clip_image001[6] More components don’t necessarily imply more complexity – systems with few components can be more complex than systems with many components.

clip_image001[7] When presented with two equivalent options, for example in terms of performance, risk or profit, select the one with the lower complexity – it will be easier to manage.

clip_image001[8] Spasms or dramatic changes in dynamical systems are always accompanied by sudden changes in complexity.

clip_image001[9] In nature, systems tend toward states of higher complexity, but only until they reach the corresponding maximum. This poses limits to growth and evolution.

clip_image001[10] Systems with high complexity can behave in a multitude of ways (modes).

clip_image001[11] Systems with high complexity are more difficult to manage and control because of the need to compromise

clip_image001[12] A system with a given complexity will be more difficult to manage if it is made to operate in a more uncertain environment.

clip_image001[13] “High complexity is incompatible with high precision” – this is known as L. Zadeh’s Principle of Incompatibility. In essence, you can’t make precise statements about a highly complex system.

clip_image001[14] A fundamental characteristic of highly complex systems: they are robust yet fragile!

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