Global Risks 2012 - Seventh Edition | World Economic Forum-Global Risks 2012 - Seventh Edition
Economic imbalances and social inequality risk reversing the gains of globalization, warns the World Economic Forum in its report Global Risks 2012. These are the findings of a survey of 469 experts and industry leaders, indicating a shift of concern from environmental risks to socioeconomic risks compared to a year ago. Respondents worry that further economic shocks and social upheaval could roll back the progress globalization has brought, and feel that the world’s institutions are ill-equipped to cope with today’s interconnected, rapidly evolving risks. The findings of the survey fed into an analysis of three major risk cases: Seeds of Dystopia; Unsafe Safeguards and the Dark Side of Connectivity. The report analyses the top 10 risks in five categories - economic, environmental, geopolitical, societal and technological - and also highlights “X Factor” risks, the wild card threats which warrant more research, including a volcanic winter, cyber neotribalism and epigenetics, the risk that the way we live could have harmful, inheritable effects on our genes. Key crisis management lessons from Japan’s earthquake, tsunami and nuclear disasters are highlighted in a special chapter.
An interesting report that underlines the need to transform our society from an productivity optimizing hence brittle one to a resilient and adaptive society.
But for me this report also raise the need to again argue for a necessary analysis of what is going on and from which standpoint the discussions in Davos is held. One of the core issues underlying many of the problems and risks in this report is the structural transformation of the power and consequently governance, a lot due to the emergence of radically new communication capabilities. Because of that the platform from where this discussion is taking place is a completely different place in the power hierarchies than most of the participants think.
Underlying many of the risks in these lists we can trace the effects of a differently wired world i e an emerging bottom-up model of governance. From the Davos perspective i e the perspective from a traditional and hierarchical standpoint to much of what is going on is perceived as societal threats or risks to address, when in fact they are just threats to the traditional ways of governing! To be able to focus on the real risks and challenges in the world we must understand that a changing communication paradigm is NOT a risk to hedge for or a problem to solve. It is more like the paradigmatic shift when your life changes when you give birth your first child. It is not a problem to solve but rather a case when you mature and realize that the world doesn’t gravitate around you alone anymore, but around the new unit of the family, suddenly and magically appear. It is rather a new prerequisite that you have to come to turn with and understand how to relate to, and consequently adapt to in the best way you can, but not a problem to solve.
Source: weforum.org
Boards of Prevention - Article by Michael Schrage in S+B
The passive board — which obeys the law but does not provide meaningful oversight — is a hindrance and handicap for any corporation. In accounting terms, its oversight is mere overhead. Even when boards are more active, their involvement tends to focus on pressuring CEOs for better financial performance; it’s not clear that they provide the needed function of overseeing risk and identifying questionable behavior. Conversely, the value of a well-managed board oversight role has never before been so apparent in facilitating a company’s own health and longevity.
I could only agree with this quote. In my experience passive boards is the norm in most places. Not that they don’t try to be proactive by discussing important things, but when it comes to really take action they are usually not capable of making any real difference.
I think however that Schrage isn’t going deep enough to understand why this happens. In my analysis there is a fundamental disconnect happening between the hierarchical levels of about all organizations. Some of these gaps between levels have already become unbridgeable chasms. One of these chasms occur between the working business system and the top management teams. The other great chasm seems occur between the business driven top management teams and the hight value driven political levels.
The problem is that across these chasms very little communication of any real value for the future takes place. Instead of communicating based on for the operational levels meaningful concepts, top management tends to communicate using operational models, methods and key figures having meaning only on their own level. And since they have meaning only on their level no one on the lower levels are able to interpret, translate and break down these on the operational levels. One deep key problem here is that no one seems to even understands the need to perform this translation. And even if the manegers on the lower levels succeed in doing this, the feedback they provide to top management is usually not seen meaningful on top level management level, and top management answer by adding measurement systems of their own.
Since this feedback loop isn’t working, there is since the last decades no working calibration mechanism, which gradually have disconnected top management from the rest of the organizations.
On the higher levels there is basically the same story, but on a higher level of abstraction and with additional complexity of values and complexity of balancing many conflicting interests an a national and international level.
The boards are simply living on another planet.
In short: “The operational staff is from Mars and the top management and boards are from Venus (and politicians are from Mercury)”
(Maybe I should write a book with this name)
Source: strategy-business.com
David Hancock on risk leadership vs risk management
In a complex and dynamic world an increasing number of challenges have the character of wicked problems, i e problems which usually are impossible to formulate in isolation and often without straight forward or verifiable solutions. The problem is that our risk management methods cannot cope with these kinds of problems, sometimes even intertwined with more traditional problems.
In this article by David Hancock he describes the problem like this:
What confuses real decision-making is that behavioural and dynamic complexities co-exist and interact in what we call wicked messes. Dynamic complexity requires high level conceptual and systems thinking skills; behavioural complexity requires high levels of relationship and facilitative skills. The fact that problems cannot be solved in isolation from one another makes it even more difficult to deal with people’s differing assumptions and values; people who think differently must learn about and create a common reality, one which none of them initially understands adequately. The main thrust to the resolution of these types of problems is stakeholder participation and ‘satisficing’. Many risk planning and forecasting exercises are still being undertaken on the basis of tame problems that assume the variables on which they are based are few, that they are fully understood and able to be controlled. However uncertainties in the economy, politics and society have become so great as to render counterproductive, if not futile, this kind of risk management that many projects and organisations still practise.
To manage this he argues that have to leave our traditional risk management, where we believe we can manage risks one by one in order to let the rest of the organization continue to ignore the uncertainties. In order to do this we have to develop what he calls risk leadership, which he characterize by:
- Guiding rather than prescribing
- Adapting rather than formalising
- Learning to live with complexity rather than simplifying
- Inclusion rather than exclusion
- Leading rather than managing
A key aspect of this is to accept the uncertainty and use e g scenario planning in order to build an organization that will not focusing on maximizing results but produce acceptable results in a uncertain, dynamic and changing environment.
This is very similar to the discussion about organizational resilience I and a few others are have had for some time.
Read the full PDF of the article.
