UPDATED:: Quake in Japan illustrated fragility of “Global Supply Chain” & flaws in conventional “wisdom”

Business continuity planning life cycle

Business continuity planning life cycle (Photo credit: Wikipedia)

The case for a Company to maintain a current and comprehensive Business Continuity Plan does not come much better than this example from HP!

Modern global supply chains, experts say, mirror complex biological systems like the human body in many ways. They can be remarkably resilient and self-healing, yet at times quite vulnerable to some specific, seemingly small weakness — as if a tiny tear in a crucial artery were to cause someone to suffer heart failure.

via Quake in Japan Broke a Link in Global Supply Chain – NYTimes.com

Of course EVERYONE hopes that they never have to contend with what the Japanese nation have had to live through. But, at a time in the history of our planet, when the impact of events on the other side of the planet have truly global repercussions, “HOPE” isn’t much of a strategy! 

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Insurance & Reinsurance…as simple as “A, B, C” but much more dangerous!

Apparently my (lone) voice isn’t sufficient to alert the UK financial & insurance industry to the folly of their perspective on “risk”! So, I am eternally grateful to Tim Harford for this presentation!

PLEASE watch this and don’t make the mistake of thinking that the “problem” relates only to Oil disasters, Financial or Nuclear meltdowns. The lesson is that, if the means of communicating INFORMATION, quickly and effectively, between business units, is impaired in complex systems (and that includes relatively small businesses), events WILL happen faster than you or “the system” can react and can have HUGE, unforeseen [not unforeseeable] consequences. This is the nature of the world as we now know it.

Complexity & Close-coupling cause losses!!!

This should be required viewing for every underwriter, risk manager, insurance company executive, banker and regulator…except that many of them already KNOW precisely how risk cascades and spreads. I am constantly amazed how many learned people, in finance and insurance, who  talk about “contagion” and “systemic risk” as if it is something that they don’t have to worry about! THE PROBLEM IS, THEY DON’T KNOW HOW TO ADDRESS THE PROBLEM, SO HAVE FILED IT UNDER “INCONVENIENT TRUTH”, waiting for the time when the shit hits the fan (again) so they can try to convince us that failure was unforeseeable – a Black Swan event – they don’t want to have to admit how little they know about causality, preferring instead to rely upon historic risk data…as if our industrial past holds all the answers we need in our extremely complex, inter-connected, Digital present and future.

Tim talks in great detail about the failures that led to the loss of 167 lives on the Piper Alpha Oil rig and how the sheer volume of data means we can miss vital INFORMATION that could serve as a means of crisis anticipation.

Now, if you have read any of my previous blogs about complexity and risk, you will know that just because “they” say they don’t know what the answer to problem is, doesn’t mean that there is no answer.

BECAUSE THERE IS! This is why I was so excited by what Ontonix, under the inspirational leadership of Dr Jacek Marczyk, had developed and why I keep going on about it DESPITE the enormous challenge of cracking “institutional inertia”.

I would like to highlight a previous article from 2010: Does complexity guarantee “system failure”?

NOT because I am not trying to claim to be so far ahead of the curve here BUT to try to illustrate that the knowledge is out there but too many people who have the power to do something about it AREN’T…go figure!!!

“Complexity, Concentration and Contagion”:: Andy Haldane & Bank of England making progress


We should all be grateful that “thinkers” like Andy Haldane are in positions of influence. The only problem being that, at the current rate, YET AGAIN, we stand to learn the most painful of lessons after-the-event instead of embracing tools that can provide crisis anticipation or “anticipatory awareness” to (if not avoid) then mitigate the impact of contagion.

The excellent author, Mark Buchanan, recently wrote:

Over the past three decades, the global financial system has become more dynamic and interconnected, more concentrated and complicated than ever before. Financial engineering seems to know no limits to creating new instruments that link institutions in new ways.

Is that a good thing? Or could the resulting financial network be too complex? Or, perhaps, complex in the wrong way?

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A Bubble Promoted with Anti-values

The impact of “ambiguity of purpose”, necessitated to mask the loss of values, led to conflicting strategies, misaligned objectives and, therefore, convoluted and complex processes. These impact the manageability, effectiveness and profitability of the system.

This is manifest in the corruption(!) of the structured information-flow across systems, as increased risk/excessive complexity and impaired resilience.

via A Bubble Promoted with Anti-values.

Beware Zombie’s in pinstripes!

What do we do when an organisation becomes so complex that it fails to perform the functions for which it was intended…when it is no longer “fit for purpose”?

Well, in nature, it dies and decays or is killed and eaten. This is as it should be in business!

But, as we now know, that isn’t always the case. We have current examples of institutional failure and collapse – but deemed “Too Big To Fail” – being artificially kept alive at escalating and unsustainable expense to you and me!!!. I am, of course, referring specifically to Banks and the Public Sector.

These “Zombie institutions” are as slow as the real deal but they don’t crave your flesh or change physical appearance until in the latter stages. Read more of this post