The Business Continuity Institute's Middle East Conference will be taking place in Doha, Qatar on the 11th and 12th May and on day two of the conference, Howard Mannella MBCI, Managing Principal at Alternative Resiliency Services Corp, will be speaking on the subject of unforeseeable risk.
No, this article is not a Monty Python skit. Yes, there’s a bit of humor (hopefully). But it’s also serious. We need to understand some of the drivers and global trends that affect risk. More importantly, we need to come up with actionable ways to improve our understanding and management of risk, to the better survivability of our organizations.
So, first things first. What’s a black swan? Let’s get a definition out of the way: a black swan, to paraphrase Naseem Taleb, is an event that is (1) unpredictable, (2) massively game-changing and (3) in hindsight completely foreseeable. If it does not embody all three elements it’s not a black swan. Taleb says they’re rare – I say that’s changing. More on black swans, and also white swans, at the Conference.
Lots of people toss this term about almost colloquially, and many people (including consultants) wax eloquently about them. The more interesting discussion is: where are we going in terms of massive un-plannable events? I submit that these type of events are becoming more frequent and more impactful. This is due to a number of factors. Let’s unpack them!
There’s no question that our world is moving faster. Every measure agrees. The speed of information-gathering has gone ballistic. Martin Hilbert, writing in Science Daily, pegs 2002 as the threshold of the Digital Age – the year that the amount of digital information surpassed the amount of analog information (books, hieroglyphics, etc.). Kilo, mega, giga, tera, peta, exa, zetta, yotta! There’s more data generated in the last 20 years than in the previous 2,000. Yes, much of that consists of cat videos and Justin Bieber tweets but some is important. Technology in general is evolving faster. Mobile adoption is accelerating exponentially (that’s the numbers with the little numbers above and next to them). Innovations like Google Glass and the iWatch are coming faster and will have game-changing impact on the world. It took thousands of years for the human population to reach 4 billion (in 1980). The IP address scheme was invented in 1974 (the Nixon Administration!) to accommodate 4 billion addresses and we’ve already run out. An “Internet Year” is three months… and now we’re talking about Internet 2.0, “The Internet of Things”: in the near future, you will finish the carton of milk in your fridge, and 60 minutes later a drone will airlift a fresh carton to your front yard! Email is already becoming archaic and out-of-date. The speed of business is also accelerating due to Just-In-Time and other factors. Anything runs this fast, it's going to trip. The world’s no different.
Other factors are also contributing to the increasing frequency of game-changing unpredictable events. The rise of global extremism means that there will be another 7/7, another 9/11… and another. The globalization of economies will also make crises more frequent. Why? When European economies were distinct and sovereign, a country’s problem remained a country event not a Pan-European Crisis. Pan-European Crises were rare (notwithstanding a certain Archduke’s misfortune in 1914 and that Austrian paper-hanger in 1939). Nowadays, an economic meltdown in any PIGS country (Portugal, Ireland, Greece, Spain) will affect the entire Eurozone. The entire US Federal discretionary budget is less than what must be borrowed (thanks, China – we’re good for it, we promise!). When everything is connected, anything can domino into a black swan.
Not only will swan-worthy events be coming at us faster, they will be more impactful when they hit. Concentration Risk occurs when risks are concentrated not dispersed (D’oh!) Here’s an example. In the 1990’s, Marriott’s call center was housed in Salt Lake City. A warehouse-sized building with lots of agents… supporting Marriott. Nowadays, you can walk into a call center in Manila or Mumbai and encounter a warehouse-sized building – but it’s serving a hundred companies, often competitors. 1994 call center outage in Salt Lake, one company dark. 2014 call center outage in Manila or Mumbai, many companies dark. Global supply chains mean potential failure chains. It’s particularly interesting when suppliers serve competitors (we’ll talk about Nokia and Eriksson at the Conference).
The magnitude of events is also getting larger over time. Given all of the factors we’ve discussed, a singular event can cause more skew, causing an ordinary crisis to grow wings and become a swan. Taleb talks about the two realms of Mediocristan and Extremistan. Mediocristan is where a single additional data point does not skew the mean; Extremistan is where it does. The mean IQ of BCI attendees is a bell curve with a mean of about 120 (and you know who you are, folks). In comes Stephen Hawking or Marilyn Vos Savant and the mean does not shift appreciably. Same if a blithering idiot walks in (and you know who you are, folks). Mean IQ sits in the realm of Mediocristan. On the other hand, attendee net worth is also a bell curve with a mean value. In walks Bill Gates or Warren Buffet and the mean is skewed beyond recognition. I submit to you that the world is evolving from Mediocristanic to Extremistanic. Mean net worth lives in Extremistan. So do black swans.
How can we make our programs immune to these factors? See you at the Conference!
To learn more about what Howard has to say about black swans, come along to the BCI Middle East Conference. There is a packed programme of activities throughout the two days of the conference so to find out more, or to book your place, click here.