impossible for ideas to compete in the marketplace if no forum for
their presentation is provided or available." Thomas Mann, 1896
STRATEGIES IN RISK MANAGEMENT:
The risks are shifting . . . .
By Chauncey Bell and Gerald Adams
Contributed by VISION Consulting Inc.
September 11th, 2001 changed forever how we view risk and how we respond to it.
When previously unpredictable events are more likely to occur, then the value
of traditional preparations and predictions declines, and the value of our
capacity to respond increases. Fire prevention, while still important, becomes
less important, relatively, than fire fighting, for example.
Many businesses use the phrase "fire fighting" to mean nothing more
than the simple shift from a mood of tranquil everyday action to one of urgent
action. Many organizations are proud of their 'skill' at this shift: "We
are good," we hear frequently, "at fire-fighting." Too often,
this means, "We are good at energetically running around attempting to do
something on the spur of the moment, without any advance preparation or
thinking about something we didn't anticipate."
Dealing with Emergencies
This is more or less the opposite of what modern communities do to prepare
themselves to fight fires and deal with emergencies. Mayor Giuliani's New
York, while never before confronted with airplanes crashing into the World
Trade Center, had been preparing for a great variety of large-scale
emergencies for many years.
People serious about 'fighting fires' prepare resources, people,
infrastructures, signaling systems and, most important, unbreakable
communications systems and protocols. The object is to have a trained,
prepared, rested, practiced and properly equipped team ready to work
systematically on the job of avoiding loss of value, life and property when
unexpected emergencies and events arise.
Budgets for IT and financial security programs are growing steeply. At the
same time, corporations spend …" about 80% of their security dollars to
protect against outside threats when in fact 80% of all attacks come from the
inside."* When we look closely we find the risk management strategies of
our organizations full of this kind of inconsistency.
Frequently, for example, technology designers make the mistake of attempting
to have the technology eliminate the risk. It cannot. Technology can provide
breathing space and time to assess an emerging
risk-turning-into-a-catastrophe, allowing the humans (fire fighters) to bring
their experience to bear. Technology can give more time to take action as a
catastrophe emerges, softening and delaying catastrophic failure.
We need to accept that the world is volatile, and the conditions for a
catastrophic failure are always with us.
How are the risks we face changing? Whatever risks we face, how might our
traditional strategies be less than optimum for dealing with those risks? What
changes should we be making in our risk management strategies? In a world that
is more volatile, it is more difficult to anticipate the unanticipated.
But what about the risks themselves? What risks that we already understand -
where we have traditions, practices, institutions and common sense - are
becoming less risky? What risks that we understand less fully, and as a result
have less 'knowledge' of, are becoming more risky?
Both aspects are important. When we are surprised, or fall into danger or
fear, we tend to move rapidly to familiar ground and familiar practices. If
those familiar practices are protecting us from relatively less important
risks, then the common senses they represent, themselves may endanger us. The
'new' risks, being less familiar, are more difficult to detect, more difficult
to warn others of and more difficult to secure investments to combat.
The practices with which we tend to discover our risks usually consider only
the past. We are driving from the rear-view mirror. We are not examining the
style of how we go about interacting with our risks. The style we are
habituated to shows us statistical unities and hides from us our friends and
We have become exceptionally good at interacting with statistical realities,
and are relatively much weaker at making sense of the unities of our
customers, allies, investors and employees.
Style of Interaction
This dependence on disembodied statistical evidence, and incapacity to make
sense of the human side of the business, is not so much a failure of
intelligence services today as it represents a style of interaction with the
world. We can see the same behaviors in every sales, marketing, manufacturing
and finance department of every enterprise of any size in the western world
These tendencies combine to produce the tendency that we can see, in
hindsight, of people holding on to old, safe, behaviors long after the
behaviors have become obsolete or even dangerous.
Let's use inventory as an analogy. Twenty-five years ago, it was risky -
financially, and operationally - not to maintain inventory on hand. Today it
is risky, financially and operationally to maintain inventory. In the computer
business, Dell has taught us that the value of a newly manufactured PC
depreciates by roughly 6% per month during its first months after manufacture.
Toyota has tried, mostly unsuccessfully, to teach us that to hold inventory
damages our capacity to manufacture automobiles that produce satisfaction for
However, the vast majority of the Toyota revolution came from the way in which
the managers of Toyota and the companies learning from it mobilized all of
their employees' eyes, ears, brains and sensibilities in the job of improving
quality and removing sources of dissatisfaction for their employees. The
current situation is a direct parallel. In our experience, western enterprises
persist in investment strategies with the wrong emphases.
In a world increasingly and dramatically more volatile, we are addicted to
investments in prevention and prediction. We are naļve and mechanical in the
ways that we prepare ourselves for taking action when our best efforts to
predict fail us.
By contrast, our greatest opportunities to reduce risks in our organizations
and our systems usually will be found through multiplication of our capacity
to distinguish the risks we are not already familiar with, by building
networks of concerned people who are talking to each other about their
concerns. The Japanese manufacturing miracle was, in small part, due to
extraordinarily ingenious engineering.
Investments in protecting against our employees is an example of a strategy
that can easily backfire on us.
What does all this suggest? Opportunities to design new strategies, new tools
and new practices that can help us anticipate growing and new risks, reduce
the damage we sustain when our anticipation of risks 'pay out', and react more
swiftly and effectively when we fail to anticipate risks.
The greatest part of the work and the opportunity of what we are speaking does
not lie in a separate department of security, risk management and
risk-avoidance, but rather in a set of new concerns and orientations that
inform everything about how our client enterprises are managed, build tools,
* Computerworld, November 2001
Group Director Chauncey Bell is the architect of a set of leading-edge
practices for producing products, delivering services and managing
enterprises. He joined the VISION group board in 2001, following the deal that
saw BDA and VISION teams joining forces.
He has worked on significant projects for clients such as Intelligent Finance,
Citibank, IBM, CEMEX, AT&T and General Motors. Chauncey holds several US
patents on the design and construction of software for coordinating the action
of people and tools in digital networks.
For 20 years, he has been a senior member of a distinctive team of academics
and practitioners developing new theory and practices for management,
education, entrepreneurship, innovation, trusting commercial relationships,
and human coordination.
On graduation from Harvard College, he joined the management consulting
division of Arthur D Little, where he specialized in the development of
markets for social and technical innovations.
He ran a division of the Mayor's office in the city of Boston and served as an
adviser to the US Conference of Mayors and National League of Cities.
In the 1980s, Chauncey led the design and development at Action Technologies,
a California-based software design and development company founded by Dr.
Fernando Flores. He was the design team leader for The Coordinator, a highly
regarded early 'groupware' product for networked personal computers used by
over 300,00 people worldwide.
Co-founder, Group Director
Gerald Adams is one of the founders of VISION and the company's leading
technological innovator. His focus is invention by design that results in
market breakthroughs for clients.
Gerald is an engineer who is firmly rooted in business realities and
practicalities. Clients appreciate his ability to translate technology into
the language of business and value his rapid-pace approach to technology
He has lead strategic technology projects for telephone and Internet banks,
global insurance enterprises, dotcom ventures and worldwide corporate Internet
initiatives. He has achieved significant results for companies such as: Swiss
Bank Corp, AIG, Bank of Ireland, Dime Bank of New York, AOL Time Warner,
TheStreet.com and many others.
Gerald lives with his family in Dublin, Ireland though he spends a
considerable amount of his time engaged with the US arm of VISION's business.
He holds a degree in engineering and mathematics from Trinity College, Dublin,
Ireland and his extra-curricular passions include art, history and Greece.
Visit the Authors Web Site
for The Business Forum Library of
Search Our Site
Search the ENTIRE Business
Forum site. Search includes the Business
Forum Library, The Business Forum Journal and the Calendar Pages.
The Business Forum, its Officers, partners, and all other
parties with which it deals, or is associated with, accept
absolutely no responsibility whatsoever, nor any liability,
for what is published on this web site. Please refer to:
Calendar The Business Forum Journal
News Wire Join
Contact The Business Forum
The Business Forum
Beverly Hills, California United States of America
© Copyright The Business Forum Institute 1982 - 2011 All rights reserved.