Judging from recent comments and inputs from our readers, many business continuity planning teams fully realize that the risk landscape facing their organizations is changing, and, while they and their upper management teams can see that a new risk landscape is emerging, it remains difficult to define what is behind those changes or how their risk management strategies should respond to them.
Trying to keep this awareness out of a negative light, Armoghan Mohammed and Richard Sykes (both part of the PricewaterhouseCoopers International Limited group) have written and recently released a report entitled “Black Swans Turn Grey: The Transformation of Risk”.
Our staff agrees with Mohammed and Sykes’s belief that through a better understanding and management of risk strategy, organizations will be more resilient and better positioned to pursue their corporate objectives.
First a little background on the concept of risk and a “black swan event”. In 2007, the Nassim Nicholas Talleb wrote about “The Black Swan: The Impact of the Highly Improbable”, and, the term “black swan” was quickly adopted and became one of the three (3) major types of risks now recognized by risk management methodologies – the other two are “known risks” and “emerging risks”.
Mohammed and Sykes argue and suggest that recent experience(s) indicate that events that fit the description of “black swans” are happening more and more frequently –therefore they ask the question, “Are black swans actually turning grey?”
Exploring this approach and tying it, as well, to a real need to map out the new risk landscape, align it with the requirement for board members to better understand this reality, and integrate this reality into the management leadership so that organizations develop a risk aware culture with explicit focus on the risk appetite of the organization and then align that risk appetite with the objective marketing and growth strategies for that organization. In other words, the board has the responsibility — building on an enterprise risk management methodology – to: (1) fuse strategy more closely with risk, (2) articulate a more explicit and holistic risk appetite and (3) promote and support more active collaboration within their organizations to build stronger resilience levels across total business management systems.
Click here to read Mohammed and Sykes’ full whitepaper.
If applicable, please pass this information along to those risk management and business continuity planning teams in your organization, and, where needed, introduce these thoughts to PS-Prep strategy planning teams, as well.