2011 IBM Global Business Resilience and Risk Study:: cling to the wreckage of failure…or invest for the future?

imageThere isn’t much point in me, again, reiterating WHY “Corporate Resilience” [Nassim Taleb’s “antifragility”] is so important in the Digital Age! So, whilst I am slightly concerned that this report seems to infer this is more of an issue for larger firms, it is probably best I let any interested readers make their own minds up on the matter.

Traditionally, risk management tended to focus on a combination of risk transfer—achieved through insurance or other financial products—and business continuity planning to keep the organization running during a crisis. Beginning in the 1980s some companies started to develop enterprise risk management (ERM) programs building on the “circle of risk” first conceptualized in 1974 by Gustav Hamilton, risk manager of Sweden’s Statsföretag AB. The idea was to link different risk management activities such as identification, assessment, control, financing, monitoring and communication into a continuous process. In many cases, however, each element continued to operate within organizational silos.

The economic downturn beginning in 2008 triggered new interest in risk management, driving adoption of truly holistic approaches where managing risk is inherent to every decision. Today, leading organizations are pushing these concepts further to develop enterprise-wide business resilience strategies. They strive to make the ability to respond rapidly to all kinds of unexpected events—opportunities as well as threats— part of the corporate culture. This means building a business resilience strategy that engages everyone in the organization.

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Power Laws & Complexity Management


Mark Buchanan is one of the best writers on this most complex of subjects and this article (click on image for link) covers exactly what it says on the tin!

I particularly appreciate that he tackles key aspects of the wider subject in such a manner as to make it readily understood by anyone with a desire to learn and apply what the knowledge.

Business leaders NEED to understand the nature of  complexity and the threat of self-generated risk (excessive complexity for poor structure, processes, etc.): risk resulting from the execution of the processes that facilitate functionality.

Also, to appreciate the systemic risk exposures communicated by organisations with whom they trade…without which they would fail…reinforces the most pressing need for in-depth assessment of existing and prospective partners…both up and downstream.

MB illustrates this point and the exposure that comes from Global Supply Networks “beautifully”, by recounting the sorry tale of the enforced departure of Swedish company Ericsson from the mobile handset market thanks to a factory fire in Mexico!



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Presentation: deeper understanding by thinking in systems

“Systems thinking” can help with the understanding of so much in our lives that, we either take for granted, or are content to leave in the “domain” of Academics, experts and specialists. I thought this an excellent presentation on the subject and one that may “whet the appetite” to learn more about the complexity of non-linear systems.


Business owners, finance and risk professionals who continue to think predominantly in terms of linear processes will only succeed in increasing uncertainty in the environments in which they operate…and beyond!

Why? Because it is much easier to stick with an engrained belief system (Mental Model), particularly one that is widely accepted, understood  and applied than it is to question or challenge the norm. Contrarians are as welcome as whistleblowers in firms with something to hide!

What systems thinking illustrates is that, we need to reconsider much of what we know – or thought we knew – about “risk”. We don’t exist in a “Gaussian world” that fits neatly into a bell curve. The fact is that “outliers” in data cannot be discounted. Rare events do happen and their impact can be disproportionately large. Read more of this post

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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Low probability: HIGH impact events

buiding-collapseIf you think I am exaggerating the risks then PLEASE do tell me but, first, you may want to give it some thought.

A few years ago, “disasters” – whether natural or man-made – that involved a large number of fatalities, affected whole countries (or regions) were, to many, just news items to view at dinner time or discuss over a beer. They tended to happen to people unknown to you and so far away that perhaps the scale was lost on you.

Even the newsreaders only change their tone and put on the “sad faces” if ”…among the victims were (?) Britons”. I wouldn’t necessarily say that Live Aid changed things but it certainly helped “prick the social conscience”.

We (in UK) should consider ourselves fortunate that we have not  DIRECTLY suffered as a result of  tsunamis – volcanoes – earthquakes – droughts. Hungary HAD a proud track record of zero toxic sludge, The Gulf of Mexico for oil spills that last for weeks and Chernobyl for explosions! These and other events, such as the virtual collapse of global banking, Somalian Pirates, Terrorist attacks, flu pandemics and striking Chinese workers may not be happening on your doorstep…I wouldn’t want to live on that street(!)…but the point is that the inter-connectedness that brings global trading and opportunity has “baggage”.

Low probability: high impact events (Black Swans) can destroy the complex infrastructure of inter-connected systems and networks that have taken years to build. Systemic risk has the ability to hit, almost, without warning and to gather in momentum as it attacks the least robust and resilient enterprises.

Past experience of events helps us assess, mitigate, manage, price, aspects of risk but we have insufficient data to assess and quantify the probability of losses arising out of systemic risk…

A model-free Complexity analysis from Ontonix is the first step toward protecting against systemic risk. Our unique technology extends the risk horizon beyond that of conventional risk management techniques.

Our goal is to make decision-makers aware of the fact that since complexity can be measured, it can be managed.


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