The certainty of uncertainty


When the business of a business is pretty predictable, as it was in the Industrial era, there is less need to focus on resilience or responsiveness. In the old days, business could undertake planning exercises and be reasonably safe in the knowledge that the functioning of the business would be able to successfully execute its plans and that the environment would not impinge too greatly on those plans. In the modern era where knowledge is “a core commodity and the rapid production of knowledge and innovation is critical to organisational survival” (Bettis and Hitt, 1995, ‘The new competitive landscape’), business needs to get to grips with the reality of uncertainty and decreasing forecastability. Businesses also need to remember that they are living systems within wider living systems. Global environmental, political, economic and financial challenges all impact on a business’s ability to succeed.

quantum shifting

Sometimes you read something that really strikes a chord.  I recently saw this quote from Kurt Vonnegut:  “We have to continually be jumping off cliffs and developing our wings on the way down.”  In other times, I would read this and it would simply seem like a poetic truism, but I’m currently experiencing a number of shifts in my personal situation which made me read that quote as if it was written just for me.  These shifts are creating a fair amount of uncertainty and bringing up all the associated emotions that go with it.  In times like this, it is useful for me to remember that trying to control what is going on in my world will not lead to the best outcomes and in fact, that I need to call on the kind of resources that will best keep me going in times of uncertainty.  These resources, in…

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PwC:: insurance companies must adapt to changing market dynamics – Insurance Age


PwC insuranceI could not agree more with these words of wisdom from David Law. This isn’t the first time that PwC have tried to warn the industry about the need to “evolve” for survival in a rapidly changing risk environment.

Contrary to what some would have you believe, the lack of innovation – of the “creative destruction” variety – as evidenced in self-similar operations, culture, products, etc. IS all the confirmation that one should need to establish that “risk businesses” are still intent upon looking at the past for answers about the future instead of scanning their own risk horizon and creating resilient strategies for uncertainty!

risk horizonDavid Law, global insurance leader at PwC, said: “The immediate pressures of market volatility and regulatory upheaval have left little space in boardroom agendas for insurers to think about how to remain competitive in the years ahead. It is vital insurers do not get blinded by the current challenges and set a clear vision for the future.

“Growth opportunities exist, particularly in faster growing economies and from new technology developments, and those insurers that are able to respond to this changing risk landscape with innovative solutions will be rewarded by the way they are valued by customers and investors.”

He added: “Insurers who are too slow to respond to the changing market dynamics could find themselves on the back foot competitively and struggling to secure sufficient capital.

via Pwc: companies must adapt to changing market dynamics Insurance Age.

World Economic Forum:: digital information structure and risk resilience


More critical thinking from WEF. Instead of existing “apart from” digital networks, the “semantic web” is as much apart of us as we are of it! I don’t expect universal agreement but how truly independent are we? How much of what we rely upon, as individuals and businesses, could we do without if we don’t have access to cash to buy food, communications and global logistics?

Understanding and embracing INTERDEPENDENCE would be a good start. After all that is what makes the difference between successful and resilient complex systems and those that are inter-connected but fragile due to ineffective [ambiguous] communications: collaboration not competition. Read more of this post

McKinsey:: strategy for the turbulent world of complexity and uncertainty


Click on image for report link

Globalization and technology are sweeping away the market and industry structures that have historically defined the nature of competition. Although the pace of change continues to accelerate, the fundamental transformations under way in the global economy have only just started. The variables that can profoundly influence success and failure are too numerous to count. That makes it impossible to predict, with any confidence, which markets a company will be serving or how its industry will be structured—even a few years hence.

The result is an economic environment that is rich in opportunity but also marked by a substantial increase in awareness of risk and aversion to it— a phenomenon reflected in the rise of risk premiums throughout the world even while the risk-free cost of capital remains low.

This is a very interesting report and, although more in-depth and from slightly different perspective, carries a broadly similar message to that, contained in a report from Boston Consulting Group, that I wrote about recently:

Adaptability: The New Competitive Advantage

Of course it is much easier to glibly talk about managing complexity and building resilience than it is to “do it”…especially without tools from Ontonix! We can also assist with identifying areas of weakness and strength within the organisation and its ecosystem.

It is vital that the operational and financial structure; IT; commitment, capacity and capabilities are aligned; sufficiently robust to underpin “sustainable transformation” and a resilient strategy, capable of creating opportunities from threats.

Read more of this post

Complexity and Consequence: what financial and risk engineers MUST learn from mech. eng. (or anywhere)


Gadget craziness

Image by XuRxO via Flickr

Recently, I have found myself writing about the importance of ADAPTABILITY* & RESILIENCE in complex (business) systems. This is, partly, due to the fact that, the acceptance of the “shortcomings” of current risk models and tools, are becoming more widely “recognised” (in some instances “admitted”)!

*Boston Consulting Group recently cited “Adaptability: the new competitive advantage”.   

The number of Consultancies that – after many years of profiting from preaching the merits of (now-discredited) models and strategies – have now discovered, and wish to share, their “new found” expertise in “complexity theory” and “systems thinking”.

Unfortunately, their participation in the education process wont undo the damage done!

WE should be grateful that the damage their contribution to the prevailing culture has done is substantially reduced and that a higher level of business understanding is, increasingly, on the agenda.

However, I suspect that we have not seen the last of Consultancies promoting and implementing “solutions” that make (business)  systems and economies more fragile…because there are fees to be earned! Read more of this post