Changes to air cargo security will have repercussions


Cargolux Boeing 747-400F loaded or unloaded at...

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What will be the impact upon Global Supply Chain in the short and medium term? How well equipped are organisations to cope with disruption and delay. Or, more significantly, the financial impact of events outwith the scope of their anticipation, control and measurement, upon their own and their customers’ business?

Black Swans: A Corporate Governance “blind spot”

How many have really assessed “their fitness”? I suspect that, as the focus for so long has been “lean”, that some will be so fragile that, failure is inevitable…but the only way to know where an the operation stands – how structurally robust it is – is to measure it. That is precisely what we, at Ontonix, are able to do!

The discovery of two bomb devices en route to the US has resulted in proposals to tighten air cargo security. Yet, without standard security measures which are internationally applicable, this will be difficult to enforce. Meanwhile, more stringent restrictions may adversely impact wider economies as a whole, with many sectors depending on timely cargo deliveries.

The recent events in the air cargo industry, where two bomb devices originating in Yemen were intercepted by security officials in Dubai and the UK on their way to the US, have shaken the foundations of air freight to its core. Apart from passenger safety considerations, the air cargo industry and the impact on the wider economy are at stake. Furthermore, most passenger airlines carry air cargo in the belly of the plane, so the threat applies to both areas of air transport. Global volume for the air freight industry is estimated to reach almost 200 billion freight tonne kilometres in 2010, of which a substantial percentage is carried on passenger aircrafts…

Read more at Datamonitor Research Store – Changes to air cargo security will have repercussions.

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World Economic Forum: Global Risks 2010 – complexity perspective


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The Annual WEF: Global risks report always makes interesting reading but, from a “complexity perspective” this year is of particular interest to us at Ontonix. Of course that is not to say that this is the full extent of the interest! It really gets meaningful when we are able to work with clients to tackle the issues that have been identified.

I have endeavoured to convey in the above graphic the inter-connections between the various domains. As we know, but sometimes forget, more life exists outwith the Economic domain than in it. Hold that thought. Keep it with you. Because interdependence is encoded in what makes and keeps us ALL.

SO, please take the time to read these extracts that, in one way or another, reference risks arising and/or increasing as a result of the “complexity” that comes from inter-connectedness.

The messages are there for corporations to see but, it is very clear that, unless the carriers of financial and insurance risk proactively tackle the task of providing solutions they will fail their global clients, shareholders, reinsurers, investors, etc.

Attempting to resolve 21st century risks with 20th century tools and techniques can only have one outcome.

Cross-cutting themes

Three themes provide the backdrop for discussion in this report. As the first chapter discusses, the increase in interconnections among risks means a higher level of systemic risk than ever before. Thus, there is a greater need for an integrated and more systemic approach to risk management and response by the public and private sectors alike. Second, while sudden shocks can have a huge impact, be they serious geopolitical incidents, terrorist attacks or natural catastrophes, the biggest risks facing the world today may be from slow failures or creeping risks. Because these failures and risks emerge over a long period of time, their potentially enormous impact and long-term implications can be vastly underestimated.

The Global Risks 5i Framework applied to transnational crime and corruption

Insight: Crime and corruption thrive on the increasing complexity and opacity of supply chains and global markets. While various actors and institutions have visibility into segments of the chain, most often they lack the complete overview of the chain and interactions within it. Forward-looking risk management must therefore identify these interlinkages and account for the entire sequence of exchanges from the source to the distribution to end customers, identifying the trading routes and facilitators connecting each step.

Critical Information Systems and Cyber vulnerability Read more of this post

Supply chain complexity


My interest and that of my colleagues at Ontonix is “the mastery of complexity”. But it can be a difficult message to communicate to business leaders for whom the term complexity either means very little or sounds vaguely like something made up by the type of Consultants who will invent new (and scarier) threats to business just to keep them in the style to which they have become accustomed!

So, it is reassuring and extremely useful when experts from business and/or Academia use their significant influence to warn of the, very real, dangers. In his article, Supply chain futures: the mastery of complexity, Philip Greening does us – as providers of unique Complex Systems Management, Business Risk Management & Quantitative Complexity Management IT solutions – and members of the Supply Chain community an enormous favour. Read more of this post

Conventional risk management…a waste of money!?


Apologies to any hardcore risk managers who are offended that I even pose such a question…PLEASE read on and (I hope) you will understand why I pose the question. I make no apology for “recycling” extracts from earlier blog items to TRY to convey a supremely important message:

A recent item referred to a Report by US National Academies/NRC & Fed. Reserve Bank of NY and I wanted to revisit this from my summary:

Two particularly illuminating questions about priorities in risk management emerge from the report. First, how much money is spent on studying systemic risk as compared with that spent on conventional risk management in individual firms? Second, how expensive is a systemic-risk event to a national or global economy (examples being the stock market crash of 1987, or the turmoil of 1998 associated with the Russian loan default, and the subsequent collapse of the hedge fund Long-Term Capital Management)? The answer to the first question is “comparatively very little”; to the second, “hugely expensive”.

“We can’t solve problems by using the same kind of thinking we used when we created them” Einstein

We knew about this threat and did little about it. Now, some may say post-crisis others mid-recession, we are STILL failing to address the underlying issues. Preferring to waste even more time and money on ad hoc or ill-considered regulations. That is one of the reasons why we, at Ontonix, believe that we offer genuine solutions to the underlying problem of assessing the complexity and robustness of system(s).

Institutions are under pressure like never before and it will only get worse because they are more intent upon defending the indefensible and to fight to retain power and wealth…worryingly reminiscent of the words of Dr Joseph Tainter referring to The Collapse of Complex Societies:

Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.

buiding-collapse In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn’t regard the sudden de-coherence of these societies as either a tragedy or a mistake—”[U]nder a situation of declining marginal returns collapse may be the most appropriate response”, to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.

When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.

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If “Risk Leaders” don’t know…how can their bankers and insurers?


Here is the latest video offering from Ontonix, I trust that you will find it informative!

From a personal perspective communicating, to a prospective client or interested party, what “Quantitative Complexity Management” is about is a complex task in itself and I sincerely hope that this video explains the process, the valuable (previously hidden) information that can be obtained and how a business can derive enormous benefit from such insight.

The case study is an interesting and, in the current climate, a relatively unusual one. It is a successful, growing, business with a management team who, despite their obvious success, appreciate that there is more to learn about the business, They are prepared to be proactive and to seek out sources of risk. They are the type of RISK LEADERS who appreciate that ERM, Legal, Regulatory compliance can count for little if the underlying structure of the business is fragile. They are ensuring that the business is “fit for randomness”. That they are robust. To a bank or an insurer they represent an excellent risk:

financial – credit – management liability (D&O) – property – casualty

THE BURNING QUESTION REMAINS, IF INSIGHT INTO THE GENERAL HEALTH OF AN ORGANISATION CAN BE GLEANED BY ANALYSIS OF FINANCIAL INFORMATION (GENERATED BY THE DAY-TO-DAY ACTIVITIES OF A BUSINESS) WHY WOULD A BANK OR INSURER CONTENT THEMSELVES WITH RISK RATING BASED UPON INCOMPLETE & HISTORICAL STATISTICAL DATA?

“Running a company based on just the financials is like driving a car by only looking at the rear view mirror!”

With Ontospace we are able to map internal operational interdependencies and effectiveness as well as external supply chain robustness. We can provide the same in depth analysis and, if required, real-time monitoring of critical operations or processes.

COMPLEXITY is not an imaginary foe dreamt up just to make life more difficult than it already is for modern business. It is the inevitable consequence of the advancements we have made. We view a business as the dynamic (non-linear) complex “system” that it is and needs to be.

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