© Copyright 2011-19, The Risk Doctor Partnership, Slide 1

Black Swan Hunting

Handling Emergent Risk

Dr David HillsonThe Risk Doctor

© Copyright 2011-19, The Risk Doctor Partnership, Slide 2

“Prediction is

always difficult,

especially about

the future”

Niels Bohr

© Copyright 2011-19, The Risk Doctor Partnership, Slide 3

DANGER

Dynamic

Ambiguous

Non-linear

Glocal (global/local)

Emergent

Relational

Beware future DANGER

The future is:

© Copyright 2011-19, The Risk Doctor Partnership, Slide 4

Emergent risks

Taleb’s Three Tests:

1. Unexpected & unpredictable outliers

2. Extreme impacts

3. Appear obvious after occurrence

Also known as:

Unknowable-unknowns

Ontological uncertainty

Black Swans

© Copyright 2011-19, The Risk Doctor Partnership, Slide 5

Example Taleb’s Turkey

0

25

50

75

100

125

150

175

200

TUR

KEY

WEL

LBEI

NG

DAYS 0 100 200 300 400 500 600 700 800 900 1000

SURPRISE

THANKSGIVING

CHRISTMAS

© Copyright 2011-19, The Risk Doctor Partnership, Slide 6

BEWARE !Black Swan = BS

© Copyright 2011-19, The Risk Doctor Partnership, Slide 7

Disruptive inventions

Cross-over technologies

Game-changers

1996

More examples

2006

2004

© Copyright 2011-19, The Risk Doctor Partnership, Slide 8

More examples

© Copyright 2011-19, The Risk Doctor Partnership, Slide 9

More examples

20 1

9

WHO KNOWS

© Copyright 2011-19, The Risk Doctor Partnership, Slide 10

Remember…

…not all Black Swans are bad!

© Copyright 2011-19, The Risk Doctor Partnership, Slide 11

Kill them before they kill you!

Hunting Black Swans

Unknowable-Unknowns = Unmanageable?

global

CAUSES

local

EFFECTS

© Copyright 2011-19, The Risk Doctor Partnership, Slide 12

Understanding global causes

1. Scientific unknowns

2. Reduced cycle-time

3. Vicious cycles

4. Varying vulnerabilities

5. Conflicting interests

6. Social dynamics

7. Technological advances

8. Time-based issues

9. Inadequate comms

10.Unbalanced information

11.Unhelpful motivators

12.Malicious behaviour

IRGC Report “The Emergence of Risks: Contributing Factors”

© Copyright 2011-19, The Risk Doctor Partnership, Slide 13

Handling local effects

Identify key vulnerabilities

Scan environment to spot emergent risks

Monitor early-warning indicators and triggers

© Copyright 2011-19, The Risk Doctor Partnership, Slide 14

TRADITIONAL RISK MANAGEMENT

Standard risk response strategies for typical risks:

Threats

Avoid / Transfer / Reduce / Accept

Opportunities

Exploit / Share / Enhance / Accept

But what about emergent risks?

Standard response strategies won’t work

Emergent risks appear too late and fully formed

Need different approach

Managing Black Swans1. Typical risks

© Copyright 2011-19, The Risk Doctor Partnership, Slide 15

Two key risk response strategies:

Flexibility

Able to bend without breaking

Adapt easily & quickly

“The bamboo that bends is stronger than the oak that resists”

Managing Black Swans2. Emergent risks

Resilience Capacity to maintain core purpose & integrity in face of challenge

Capability to regain original shape after deformation

“Bounce-back-ability”MR. BOUNCE

© Copyright 2011-19, The Risk Doctor Partnership, Slide 16

“I put a little ball at the end, so it looks like it will bounce back”

© Copyright 2011-19, The Risk Doctor Partnership, Slide 17

Which image bestdescribes your business?

© Copyright 2011-19, The Risk Doctor Partnership, Slide 18

Building flexibility and resilience

Personal

Inherent character

Practised emotional literacy

Exercise of will

Business

Shared corporate culture

Robust processes

Grounded values

Society

Strong identity

Shared values

Internal coherence across all levels

Project

Clear objectives

Appropriate contingency

Flexible processes

Strong change management

© Copyright 2011-19, The Risk Doctor Partnership, Slide 19

If we can’t control the volatile tides of change, we can learn to

build better boats

© Copyright 2011-19, The Risk Doctor Partnership, Slide 20

Why does this matter?

What you don’t know WILL hurt you

Black Swans are out there

If you don’t get them, they’ll get you!

© Copyright 2011-19, The Risk Doctor Partnership, Slide 21

HAPPY HUNTING!

© Copyright 2011-19, The Risk Doctor Partnership, Slide 22

The Risk Doctor

david@risk-doctor.com

The Risk Doctor Partnership

www.risk-doctor.com

HUNT BLACK SWANS

WITH THE EXPERTS!

© Copyright 2011-19, The Risk Doctor Partnership, Slide 23

For further information

Dr David HillsonThe Risk Doctor Partnership

+44(0)7717.665222

david@risk-doctor.com

www.risk-doctor.com

YouTube.com/RiskDoctorVideo