Risk in Uncertain Times - An approach to assess risk readiness, implications and risk mitigation

1. Risk in Uncertain
Times
A approach to assess risk readiness, implications and risk mitigation
MAY 2009

2. “there
is
nothing
more
dif/icult
to
plan,
more
doubtful
of
success,
nor
more
dangerous
to
manage
than
the
creation
of
a
new
system”
- Machiavelli
Risk in uncertain times
Risk
management
today
is
no
longer
something
that
can
be
taken
as
a
given
-­‐
that
the
tools,
processes
and
procedures
in
place
are
doing
their
job.
As
we
have
seen,
in
recent
=mes,
risk
management
has
failed
in
a
spectacular
fashion,
arguably
a
major
contributor
to
the
global
financial
crisis
currently
being
grappled
with.
We
hear
on
a
daily
basis
about
“
toxic
assets”,
about
lack
of
understanding
on
“exo=c”
financial
instruments,
about
the
dubious
ethical
prac=ces
on
Wall
Street
and
the
corporate
values
absen=ng
themselves
from
the
boardroom.
When
common
sense
failures
have
played
out
on
the
front
page
of
na=onal
newspapers,
it
is
clear
that
some
organisa=ons
did
not
just
have
a
gap
in
basic
risk
assessment
procedures
-­‐
these
were
symptoms
of
systema=c
and
cultural
collapse
manifes=ng
themselves
in
less
obvious
ways.
The
most
serious
gaps
being
papered
over
did
not
relate
to
technology
and
models
-­‐
the
tools
that
have
been
the
mainstay
of
risk
management,
but
rather
the
roles
people
played
and
the
company
decision-­‐
making
processes.
At
its
most
basic,
catastrophic
failure
has
its
origins
with
people
-­‐
their
behaviors,
values,
ethics
and
interac=on.
If
we
believe
that
people
are
an
important
and
oGen
mis-­‐aligned
aspect
of
risk
management,
then
we
need
to
understand
their
role
in
managing
the
impact
of
change
in
uncertain
business
environments
and
mi=ga=ng
the
probability
or
impact
of
nega=ve
changes
that
could
occur
in
the
future.
“Let’s
today
step
out
of
the
normal
boundaries
of
analysis
of
our
economic
crisis
and
ask
a
more
radical
question:
What
if
the
crisis
of
2008
represents
something
much
more
fundamental
than
a
deep
recession?
What
if
it’s
telling
us
that
the
whole
growth
model
we
created
over
the
last
50
years
is
simply
unsustainable
economically
and
ecologically
and
that
2008
was
when
we
hit
the
wall
-­
when
Mother
nature
and
the
market
both
said:
“No
more”
”
- Thomas Friedman
Page 2

3. The new normal requires a new approach
“Societies
are
said
to
swing
like
pendulums
between
alternating
phases
of
vigor
and
decay;
progress
and
reaction;
licentiousness
and
puritanism.
Each
outward
movement
produces
a
crisis
of
excess
which
leads
to
a
reaction.
The
equilibrium
position
is
hard
to
achieve
and
always
unstable.”
- Robert Skidelsky
It
is
becoming
more
apparent
that
the
current
downturn
is
fundamentally
different
from
those
of
the
past.
We
are
not
just
experiencing
another
phase
in
the
business
cycle,
but
a
fundamental
restructuring
of
economies.
So
the
old
adage
“hindsight
does
not
lead
to
foresight”
con=nues
to
ring
true
today.
The
tried
and
true
methods,
tools
and
processes
of
the
past
might
not
necessarily
provide
the
solid
founda=ons
for
risk
management
required
for
future
growth.
We
need
to
embrace
the
uncertainty
that
we
are
grappling
with
today
and
look
to
new
ways
of
understanding
how
to
effec=vely
include
our
people
in
new
risk
management
frames
and
strategies.
Today’s
economic
slowdown
can
serve
as
a
catalyst
for
organisa=ons
to
take
a
more
strategic
perspec=ve
on
risk.
It
can
create
the
impetus
for
organisa=ons
to
take
a
more
intelligent,
fact-­‐
based
approach
to
understanding
their
current
and
future
risk
requirements
as
well
as
providing
the
opportunity
to
iden=fy
and
fill
gaps.
Most
importantly,
it
can
drive
the
mandate
for
overall
workforce
transforma=on
on
views
towards
risk
-­‐
a
rethinking
of
the
work
that
must
be
done,
the
manner
in
which
individuals
accomplish
the
work
and
the
role
senior
execu=ves
need
to
play
in
helping
the
organisa=on
assess
and
manage
risk
through
difficult
=mes.
Emerging
Op+ons
has
been
working
with
Cogni+ve
Edge
in
the
use
of
“narra+ve
techniques”
to
capture
and
understand
the
drivers
of
risk
in
Context.
The
approach
is
based
on
some
core
principles:
•
Faced
with
complex,
difficult
or
intractable
challenges,
we
prefer
to
find
several
people
with
appropriate
exper+se
and
listen
to
their
stories
(generally
known
as
fragments
or
anecdotes)
form
which
new
understanding
and
capability
is
synthesized.
•
It
is
not
just
key
employees
who
manage
risk;
it
is
cri+cal
to
discover
who
has
the
ability
to
impact
and
influence
risk
and
where
it
these
ac+vi+es
can
occur.
•
Systems
to
support
managing
risk
need
to
also
support
ambiguous
enquiries,
to
reflect
the
way
in
which
people
have
conversa+ons
around
the
water
coolers,
par++ons
or
silos.
Humans
engage
in
“serendipitous
encounters”
with
others,
which
can
have
an
impact
on
percep+ons
of
risk.
Page 3

4. Our approach to Risk
Emerging
Op=ons
employees
a
three
phase
approach
to
the
human
face
of
Risk:
Making sense
The Human Identification Risk mitigation
of risk
face of Risk of Risk areas & intervention
implications
This
approach
provides
the
ability
to
very
quickly
understand
what
people
perceive
about
risk
and
how
they
approach
addressing
and
mi=ga=ng
risk
issues.
The
workshops
and
processes
used
are
not
mutually
exclusive,
and
are
designed
to
sit
alongside
exis=ng
risk
management
programs
as
an
adjunct
to
and
value
added
missing
link.
Iden*fica*on
of
Risk
areas
Risk
exists
at
four
levels:
•
Strategic
–
risks
ensuring
business
survival
and
long-­‐term
security
or
stability
of
the
organiza=on
•
Program
–
risks
involved
in
managing
interdependencies
between
individual
projects
and
the
wider
business
environment
•
Projects
–
risks
involved
in
making
progress
against
project
plans
•
Opera=onal
–
risks
involved
in
the
day
to
day
running
of
the
business
Associated
with
each
level
of
risk
are
the
people
aspects
of
the
business
that
will
impact
on
each
level
of
risk
and
the
rela=onships
that
exist
between
risk
levels:
•
Values
by
which
the
organiza=on
operates
•
Rela=onship
networks
•
Trust
•
Stakeholder
rela=onships
•
Transparency
•
Knowledge
sharing
Even
the
great
neo-­liberal
ideological
standard-­bearer,
the
long-­serving
chairman
of
the
US
Federal
Reserve
Alan
Greenspan,
recently
conceded
in
testimony
before
Congress
that
his
ideological
viewpoint
was
/lawed,
that
the
“whole
intellectual
edi/ice”
of
modern
risk
management
had
collapsed
- Kevin Rudd
Page 4

5. Emerging
Op=ons
uses
SenseMakerTM
to
capture
large
volumes
of
narra=ve
from
the
organiza=on
to
unpack
staff
and
management
views
on
risk
at
each
level,
its
impact
on
the
organisa=on
and
areas
where
risk
is
not
being
managed
well
from
the
grass
roots
level
up.
Literally
thousands
of
stories,
anecdotes,
pictures,
ar=cles,
verbal
records
and
much
more,
can
be
captured
at
a
minimal
cost.
Those
who
provide
the
stories
or
submit
other
sense
making
material
answer
a
number
of
ques=ons
that
provide
the
indexing
criteria,
and
subsequent
repor=ng.
Indexing
is
customised
to
each
organisa=on’s
risk
profile
and
central
to
the
Cogni=ve
Edge
Sense
Making
soGware’s
ability
to
shown
paWerns
that
could
uncover
emerging
trends,
issues
or
insights
around
risk
that
are
not
readily
apparent
with
tradi=onal
methods
of
data
interroga=on.
SenseMakerTM
will
allow
for
the
uncovering
of
paWerns
around
risk
and
people’s
appe=te
for
risk
vs
reward.
The
dataset
collected,
will
also
form
the
basis
for
the
ongoing
benchmarking
of
iden=fied
risk
drivers
moving
forward.
The
kind
of
complex
organic
database
created,
can
help
you
find
out
who
is
saying
what,
and
how
a
challenge
or
project
is
being
handled.
For
example,
six
clicks
of
a
mouse
buWon
can
tell
you
all
the
stories
told
by
an
experienced
staff
member,
facing
a
crisis,
involving
deep
conflict
and
emo=ons,
told
from
their
point
of
view,
with
the
inten=on
of
teaching.
Depending
on
the
number
of
queries
you
look
at,
you
can
narrow
or
expand
your
poten=al
insight
about
what
might
be
relevant
and
what
might
not.
SenseMakerTM
will
provide
the
organisa*on
with:
•
ability
to
allow
mul+ple
perspec+ves
to
be
visible
and
recognized
-­‐
to
make
the
“invisible
voices
visible”
•
ability
to
value
dissent
without
requiring
aRribu+on
of
blame
•
Providing
perspec+ves
and
frameworks
that
enable
people
to
take
ac+on
in
addressing
complex
risk
issues
•
Compliment
and
work
in
conjunc+on
with
exis+ng
risk
tools
and
processes
•
The
use
of
narra+ve
as
a
key
component
of
collec+ng
and
understanding
knowledge
in
context
•
a
founda+on
for
risk
benchmarking
•
The
ability
to
uncover
risk
related
issues
origina+ng
from
changing
workforce
composi+on
•
A
boRom-­‐up
approach
to
iden+fying
issues
masked
through
organisa+on
hierarchy
•
A
near
real
+me
view
of
the
organisa+on
and
how
it
manages
risk
•
An
understanding
of
areas
that
need
greater
focus
on
risk
mi+ga+on
Page 5

6. Making
sense
of
risk
implica*ons
for
the
business
Behaviours
of
personnel
in
the
organisa+on
can
expose
it
to
significant
risk,
be
it
through
reputa+on,
financial
or
ethical
considera+ons.
The
second
arm
of
the
Emerging
Op+ons
approach
to
Risk
assessment,
iden+fica+on,
and
mi+ga+on
is
based
on
a
two
day
workshop
covering
three
key
areas:
1. Future
Backwards
-­‐
uncovering
mul+ple
perspec+ves
on
risk
2. Development
of
a
Risk
support
framework
3. Archetype
Extrac+on
-­‐
developing
a
shared
understanding
on
risk
The
Future
Backwards
The
Future,
Backwards
method
was
developed
as
an
alterna+ve
to
scenario
planning
and
is
designed
to
increase
the
number
of
perspec+ves
that
a
group
can
take
both
on
an
understanding
of
their
past,
and
of
the
range
of
possible
futures.
It
can
be
used
to
discover
what
entrained
paRerns
of
past
percep+ons
of
risk
in
an
organisa+on
are
determining
its
future.
It
can
be
used
to
compare
and
contrast
different
perspec+ves
as
to
the
present
and
the
future
of
risk.
It
can
be
used
to
generate
mul+ple
turning
points
or
decision
points
for
use
in
the
social
construc+on
of
the
Risk
Support
framework
outlined
below.
Page 6

7. Risk
Support
framework
A
Risk
Support
framework
for
each
organisa+on
will
be
developed
by
the
workshop
par+cipants.
This
framework
is
based
upon
the
Cynefin
complexity
framework
developed
by
Dave
Snowden
&
Cogni+ve
Edge
Pte
Ltd.
The
advantages
of
this
framework
include
the
ability
to
very
quickly
iden+fy
types
of
risk
that
exist,
and
priori+se
approaches
to
dealing
with
this
risk.
The
framework…..
At
the
heart
of
the
approach
is
the
Cynefin
framework;
an
open
systems
model
that
enhances
sense
making
and
provides
support
for
decision
making.
Understanding
the
dis+nc+on
between
ordered
and
unordered
elements
of
a
complex
or
intractable
problem
leads
to
the
applica+on
for
different
methods
for
diagnosis
and
interven+on
derived
from
the
different
contexts.
• Ordered
systems
are
based
on
the
belief
that
it
was
just
a
maRer
of
+me
and
resources
before
the
rela+onships
between
cause
and
effect
could
be
discovered
in
any
situa+on
• Unorder
-­‐
or
emergent
order.
PaRerns
are
self
organising
and
there
too
are
mul+ple
possibili+es
and
op+ons
to
discern
a
rela+onship
between
cause
and
effect.
The
many
management
tools
and
processes
that
we
have
available
to
address
organisa+onal
issues
primarily
assume
that
there
is
order-­‐
a
definable
rela+onship
between
cause
and
effect
that
can
inform
strategy
and
interven+ons.
In
current
complex
and
turbulent
environments,
it
is
increasingly
obvious
that
these
approaches
do
not
serve
us
well
when
dealing
with
complex
interac+ons.
The
Cogni+ve
Edge
methods
provide
the
opportunity
for
iden+fying
the
different
elements
that
need
to
be
managed,
and
specific
tools
designed
to
support
ac+on
in
the
unordered
domain.
Underpinning
concepts
for
using
the
Cynefin
framework
• Sense
Making….
Unlike
many
management
models
and
frameworks,
the
framework
and
the
boundaries
are
not
predetermined.
The
boundaries
emerge
through
discourse
rather
than
fi]ng
predetermined
categories.
Sense
making
is
exploratory,
can
detect
weak
signals
and
new
paRerns,
but
is
not
a
quick
fix
process
.
• Social
Construc+on….
Using
data
drawn
from
par+cipants,
the
framework
is
socially
constructed
within
an
organisa+on
using
one
of
a
number
of
possible
methods.
Consultants
are
responsible
for
providing
the
opportunity
for
sense
making;
but
they
are
not
involved
as
experts
in
the
collec+on
and
ini+al
! analysis
of
the
data.
• Gaining
perspec+ve…..
The
fundamental
purpose
is
to
enable
a
group
of
people
to
see
things
from
mul+ple
perspec+ves
and
therefore
to
gain
new
insights
and
ways
to
take
ac+on.
Page 7

8. Archetype
extrac*on
Archetype
extrac+on
is
an
approach
to
deriving
meaning
from
a
body
of
anecdotal
material
either
gathered
in
advance
or
created
in
the
workshop.
The
results
are
cultural
constructs
(known
as
emergent
proper*es,
these
are
expressed
as
archetypes,
values,
and
themes)
and
can
be
used
directly
or
contrasted
with
espoused
values,
or
with
the
construc+ons
of
emergent
meaning
from
different
groups
(how
do
managers
see
risk
themselves,
how
is
risk
seen
by
employees
etc).
Archetypes
are
constructs
of
shared
meaning
that
encapsulate
and
ar+culate
social
understandings
about
"the
way
things
are"
for
a
community.
Archetypes
are
not
generally
about
things
everyone
can
easily
talk
about,
but
are
usually
about
things
that
are
not
well
ar+culated
in
any
other
way.
The
process
of
deriving
archetypes
is
about
disclosure,
discovery,
and
understanding.
Archetypes
are
not
stereotypes
We
use
three
heuris+cs
to
dis+nguish
archetypes
from
stereotypes.
Archetypes
are
uni-­‐dimensional
extremes,
caricatures
that
could
never
describe
a
real
person
or
issue
or
situa+on.
Part
of
their
u+lity
is
in
their
extremity,
that
they
help
us
to
discuss
the
boundaries
of
experience,
which
are
usually
the
places
we
are
most
concerned
with
coping
with.
Everyone
and
everything
can
be
iden+fied
with
archetypes
in
some
way;
but
nobody
and
nothing
fits
a
stereotype.
Stereotypes
divide
but
archetypes
integrate.
A
group
of
archetypes
together
represents
a
"family"
of
forces
within
a
community
or
with
respect
to
a
subject.
Thus
one
archetype
doesn't
"work"
in
isola+on
but
must
always
be
understood
in
the
context
of
the
collec+ve
representa+on
of
a
community
and
a
concern.
A
stereotype
has
few
if
any
connec+ons
and
is
defined
more
by
its
isola+on
than
by
its
rela+onships.
Uses
of
archetypes
Once
derived,
archetypes
provide
a
means
of
developing
a
common
language
with
which
to
address
issues
that
are
important
but
not
always
easily
surfaced.
For
example:
•
People
may
use
archetypes
to
help
two
groups
understand
their
differing
perspec+ves
on
risk.
•
People
may
use
archetypes
to
organize
narra+ve
historical
data
so
that
they
can
quickly
find
meaningful
analogies
to
a
risk
situa+on
they
are
facing
today.
•
People
may
use
archetypes
to
design
new
approaches
to
risk
mi+ga+on
by
tes+ng
new
procedures
against
the
reac+ons
of
a
family
of
archetypes
which
represents
features
of
the
organisa+on
/
customer
community.
Page 8

9. Risk
mi*ga*on
&
interven*on
The
first
two
phases
of
our
approach
to
risk
will
have
provided
insight
into
peoples
views,
a]tudes
and
approaches
to
risk
in
an
organisa+on.
We
will
also
have
iden+fied
specific
risk
issues
present,
and
some
similari+es
/
differences
that
exist
across
divisions.
A
key
pool
of
risk
issues
will
have
been
iden+fied
in
the
complex
domain
of
the
risk
framework
that
need
further
explora+on.
The
focus
of
the
third
phase
is
on
the
development
of
specific
risk
mi+ga+on
interven+ons
to
address
those
highly
complex
risk
issues
iden+fied.
Complex
risk
issues
cannot
be
dealt
with
in
the
same
manner
as
those
where
there
is
a
rela+onship
between
cause
and
effect.
Truly
complex
risk
issues
need
to
have
interven+ons
developed
through
small
scale
probes
and
experiments.
If
a
specific
interven+on
is
successful,
then
its
applica+on
can
be
amplified.
If
it
has
liRle
or
no
effect,
then
that
approach
can
be
discounted.
This
approach
provides
for
the
development
of
high
impact,
low
cost
interven+ons
in
short
+me
frame.
A
one
day
workshop
with
key
stakeholders
and
representa+ves
of
the
business
will
provide
for
the
development
of
an
interven+on
strategy
and
implementa+on
roadmap
to
address
complex
risk
issues.
Page 9

10. About us:
Emerging Options are a consulting network specialising in
complexity and ways of helping organisations and groups
understand the world in which they participate in order to act.
Vivien Read is a founder of Emerging Options. Viv has over 30 years
experience as a consultant and manager in organisational strategy,
change management, industrial relations, leadership development, and
action learning. She has co facilitated 4 Cognitive Edge accreditation
programs, in Australia and South East Asia. She is currently involved in
projects using the Cognitive Edge tools and processes in Australia and
Singapore.
Viv is a frequent presenter at conferences, seminars and professional
groups including knowledge management societies, facilitator networks,
and training and development groups.
Chris Fletcher is a co-founder of Emerging Options. Prior to starting
Emerging Options, Chris was the Asia Pacific Director for Knowledgement
Management at Deloitte. He has over 20 years experience working
in Marketing, Business Development, Strategy and Knowledge Management -
predominantly in the professional services sector. His current focus is on using
Cognitive Edge tools and processes to help organisations and groups
understand complex issues, connect people and develop networks.
Chris is a regular speaker at conferences and seminars in the Asia Pacific
region.
For more information on this project or to express interest in participating, please contact:
Viv Read
email: viv@emergingoptions.com.au
Phone: +61 414 294 339
Chris Fletcher
email: chris@emergingoptions.com.au
Phone: +61 402 308 403
Page 10

11.
ATTACHMENT
A
Sensemaker output
Quantitative & Qualitative Data
Sensemaker provides hard and soft data for actionable results
Narrative fragments
Sensemaker uses fragments to uncover patterns not readily visible
Page 11

12. Sensemaker Reporting
Page 12