No matter how good their risk management systems are, companies can’t plan for everything. Some risks are outside people’s realm of experience or so remote no one could have imagined them. Some result from a perfect storm of coinciding breakdowns, and some materialize very rapidly and on an enormous scale. These novel risks, as the authors call them, cannot be addressed by following a standard playbook.
This article describes how to detect the emergence of a novel risk (start by looking for anomalies and appointing “chief worry officers”) and then how to mobilize resources to mitigate its impact, deploying a critical incident team or empowering local personnel to tackle it.
Building Organizational Resilience
In unstable times the routines organizations use to get work done often break down. When that happens, teams need to shift gears quickly and add two other approaches to their tool kits: heuristics, or simple rules of thumb that speed up processes and decision-making, and improvisation, spontaneous efforts to address problems and opportunities. Drawing on the experiences of a successful expedition up the most challenging route on Mount Everest, the authors explain when each approach works best and how your organization can prepare itself to weather crises by learning to alternate them.
To Recognize Risks Earlier, Invest in Analytics
Recently analytics has become the unloved stepchild of data sciences. That’s a shame, says Kozyrkov, Google’s chief decision scientist, because during turbulence, analytics is essential. When a disaster strikes, the data that goes into statistical and AI models can quickly become obsolete, rendering them useless. Analytics, in contrast, helps you figure out where events are heading and what questions to ask. Analysts are explorers who keep their finger on the pulse of what’s happening by scanning the horizon and searching internal and external data sources. Effective analytics functions cannot be cobbled together overnight, however, and firms need to commit to building an environment in which they’ll flourish.
The complete Spotlight package is available in a single reprint.
