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

Video: “Practice without sound theory will not scale”– invaluable lessons for model transformation

The following introduction doesn’t do justice to Dave Snowden’s presentation but there are some things that I felt I needed to say.

Having been an insurance broker for circa 30 years you acquire a broad “knowledge” of a wide range of industries and sectors. You also come to appreciate that there are common practices in one industry that can provide, if not the solution, then an outline of a solution in another. But, unless there is the means to communicate between industries and across sectors valuable lessons can be lost: information is transformed (and transformational) with effective communication…it should go without saying that this is also true of communications WITHIN an organisation.

In former roles, the process of learning about the business for which you were required to arrange appropriate cover, I came across variations of problems that I had seen in unrelated industries. When I did, I shared as much information as I could in the hope that this would help the client and assist me in gaining the trust and patronage of the prospective client. Sometimes this approach had the desired effect and everyone won as a result. I used to refer to it as “David’s handy hints”. I came to think of this a bit like a bee pollenating plants and, in some respects, this is a good analogy.

Having watched this fantastic presentation by Dave Snowden, I am delighted to have discovered a new term for and understanding of what it was I was doing: EXAPTATION

Read more of this post