Synchronization versus collaboration:: uncertainty v risk

The Lorenz attractor displays chaotic behavior...

The Lorenz attractor displays chaotic behaviour. These two plots demonstrate sensitive dependence on initial conditions within the region of phase space occupied by the attractor. (Photo credit: Wikipedia)

We don’t need an understanding of  ‘Chaos Theory’ to know about the “Butterfly Effect”, nor do we need a medical qualification to grasp that (hitherto) unseen flaws in human DNA can have life-changing consequences for individuals.

In business terms, those of us who are concerned enough with ‘risk’ to look beyond what conventional “wisdom” tells us, KNOW that in the Digital Age of networks of inter-connected systems and sub-systems, apparently minor errors can have a MAJOR effect:

HILP – high impact, low probability events

Power Laws [fat tail] NOT Gaussian [thin tail]

Beyond probability…to the possible and plausible.

Yet, still, risk carriers, such as banks and insurers, think and rate in terms of “old world”.

It is gone. Past. An era that will not return and the problems that are being stored-up, because they fail to embrace the facts, CANNOT be funded by informed customers!

Production did not drive our lives in the old world, but the complexity of the new societies is turning our lives into gears of a big machine. Thinking that human life has the only aim of being productive for the society is the first error of any organizational system. Engineers design the pieces of a machine in order to be manufactured with a certain level of precision that provides a good performance; however, human organizations cannot design the behaviour of the people with the required precision…

via Synchronization versus collaboration.

Revealed: the capitalist network that runs the world – New Scientist

I recently wrote "If you think "ruling elites" are a fantasy…think again" and have been boring regular readers about complexity and the threat of excessive complexity, particularly when the inter-connections are "closely coupled" (see below). Amongst others, the World Economic Forum have attempted to highlight the issues.

Financially “influential” firms SHOULD BE, as they have historically been, sources of “systemic resilience”. Instead, in a turbulent, debt-laden, global economy they can, effectively, act as “superspreaders”…hubs of systemic risk:

The 1318 transnational corporations that form the core of the economy. Superconnected companies are red, very connected companies are yellow. The size of the dot represents revenue <i>(Image: </i>PLoS One<i>)</i>AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters’ worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.

….Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. "If one [company] suffers distress," says Glattfelder, "this propagates."

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Why “problem-solving capability” NEEDS enlightened leadership

It can be difficult to understand that common management issues and disappointing business performance can be examined in the context of biological, technological and ecological systems but… they can!

If you don’t believe me, you can, pretty readily, get a copy of Stephen Covey’s famous book, “7 Habits of Highly Effective People”. I seem to recall he talks about INTERDEPENDENCE as a “higher state”. In doing so he is touching upon subjects dear to my heart and often taken for granted by each and every one of us…

…we would not fair terribly well without the unimaginable complexity of the ecosystem, that sustains our planet, or  the enormous biological complexity within the human body. There is a growing appreciation of the universality of systems: to such an extent that business, global financial, IT systems and others are now being viewed in a very different way…

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Presentation: what stage in the cycle do YOU think we are at?

I know what I think and I reckon and, had it not been for the unimaginable amounts of money created out of thin air by Governments, we would already be travelling the road to recovery in the new landscape!

I am no financial or banking expert but I really don’t believe one need be if embracing some ‘Systems Thinking‘. Of course, I would love to hear some reasoned arguments for and against my viewpoint. I hope you enjoy the presentation.

Here is some further “food for thought”

“In finance it’s often been survival of the fattest rather than the fittest”

Andy Haldane, Bank of England

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Harvard Business Review: Complex Risk Management

I wouldn’t want anyone to get too excited and think that I have added Italian to my extensive repertoire of (one) language! I have to thank one of my colleagues at Ontonix for the translation of this article from Harvard Business Review, Italy. The author – whose Linkedin profile can be accessed from the link in his name (below) – is not a member of the Ontonix team but is extremely well qualified to put forward an informed opinion.

Supply Chain and Systemic risk

The article is not, exclusively, about Japan or Supply Chains. Nor is it about just about Ontonix but it IS about gaining some understanding of complexity: what it is; why it cannot be detected by conventional risk management; how it can impact and why ignorance can’t really be an excuse.

Supply chain complexityI have written numerous blogs and several articles on the frailty of, in particular, Global Supply Chains. With very good reason. Thankfully, not every event, like that which struck Japan last month, causes such vast devastation and loss of life. But many natural disasters and, increasingly, the man-made variety pose a huge threat to businesses that are already struggling to deal with a turbulent global economy and have “lean” business models that assume the greatest threat(s) to their success come from risks that they have encountered before so can (in theory) prepare for…

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