The effect of uncertainty.
Peter BLOKLAND, PhD
Empowering organizations through systems thinking, ethical leadership, ISO 31000 training, and team alignment for better decision-making and continuous improvement.
In our VUCA world, cause-effect relationships vary considerably. It is what James Reason defines in his Swiss Cheese model as being the holes in the cheese continuously changing in form and place. In this dynamic image this becomes visible:
In today's rapidly changing world, cause-and-effect relationships can vary significantly. This is similar to what James Reason describes in his Swiss Cheese model, where the holes in the cheese are always shifting in size and location. These shifting connections can sometimes be predictable, following a logical sequence of events. However, they can also be unpredictable, arising from random decisions, actions, or unforeseen circumstances.
Each effect might lead to a new chain of cause-and-effects, but sometimes it may not. This unpredictability makes our reality harder to foresee and manage. As a result, relying solely on past experiences to react to situations is becoming less effective. That's why managing risks is becoming increasingly essential and it is why it needs to be approached holistically.
In our interconnected world, which is growing more complex every day, uncertainty is a constant factor. No matter what we do, where we work, or what our goals are, uncertainty affects everything, and it is becoming more difficult to predict, as uncertainties vary constantly.
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While predicting events and measuring their consequences is a valuable part of risk management, it is not sufficient to address the growing effect of uncertainty on our objectives. This uncertainty about the future affects goals at every level—individual, team, organizational, and even societal.
Although many people understand this concept, it still surprises me how rarely its implications are taken seriously. The unpredictable and complex nature of uncertainty means we must address it proactively. This requires us to focus on shaping the future rather than merely predicting and/or reacting to it based on past experiences. However, traditional risk management approaches, which emphasize assessing and reporting risks, tend to focus on prediction and reaction.
This is why more and more risk experts are moving away from the term "risk management." When applied traditionally, it often fails to deliver the expected value.
A modern approach to managing the effect of uncertainty on objectives can be found in the ISO 31000 guidelines. While some traditional risk management experts may not fully agree, ISO 31000 is widely recognized as a best practice for managing risk—the effect of uncertainty on objectives. Unfortunately, this understanding is not always widespread. ISO 31000 is not just another method for assessing and managing risk in the conventional way, such as using the bow-tie tool or conducting a Monte Carlo simulation. It operates on a broader level.
While risk managers use specific tools to evaluate particular risks, ISO 31000 provides a comprehensive management approach that can be applied to any organization to handle any kind of risk and objectives. It includes valuable insights and processes that are relevant and applicable for every manager involved in significant decision-making. When used correctly, ISO 31000 acts as a leadership and governance tool that helps shape the future. It focuses on aligning objectives with the organization's resources, clarifying responsibilities, and supporting managers in making well-informed decisions to manage the effect of uncertainty on individual, team, organizational, and societal objectives.
Elevating Performance through Visionary Leadership and Advanced Technology Solutions
6 个月integrating VUCA (Volatility, Uncertainty, Complexity, Ambiguity) with risk management frameworks like ISO 31000 can significantly enhance the effectiveness of risk assessment and management processes. VUCA provides a lens for understanding the challenging environment organizations operate in, while ISO 31000 offers a structured approach to managing risk. ISO 31000 helps organizations establish a risk management framework and process that is systematic, structured, and timely. By using ISO 31000 alongside VUCA, organizations can: Identify Risks: VUCA highlights areas of volatility, uncertainty, complexity, and ambiguity, helping to identify potential risks in a rapidly changing environment. Assess Risks: ISO 31000’s risk assessment processes can be applied to evaluate the impact and likelihood of these identified risks, ensuring a thorough analysis. Manage Risks: ISO 31000 provides guidelines for designing and implementing risk management strategies and controls, which can be tailored to address the specific challenges posed by a VUCA environment. Monitor and Review: The framework includes provisions for ongoing monitoring and review, which is essential in a VUCA context where conditions can change rapidly.
Senior Project/Business Consultant at PM SOLUTION PRO (Risk-based Management and Services Inc.)
6 个月Using the set theory and imagining risk using a Venn diagram, one might imagine the concept of uncertainty as a big system where risk resides. Given a singular risk that revolves around a given objective, considering a vast system called uncertainty, the probability of that risk is impossible to measure. We can calculate the probability of an identified and specific risk because we can appreciate the uncertainty boundary (or field) where the risk lies. In my professional opinion, finite boundary (a small piece of the whole uncertainty system) relevant to the objective is the only useful element in appreciating that risk, a piece of mathematical uncertainty that has practical use. It is the kind of uncertainty with more reliable probabilistic basis.
Senior Project/Business Consultant at PM SOLUTION PRO (Risk-based Management and Services Inc.)
6 个月If we could take a more macroscopic view of the risk universe as an independent observer, we would be able to see risk from more than one perspective and gain a level of understanding that most of us never thought possible before - that risk is both a threat and an opportunity. We can see both possibilities existing simultaneously. We might begin to better appreciate uncertainty. When we have no stake in the game, we can relate to both parties’ positions. Risk is not absolute, but relative.?If one thinks about it a little deeper, the concept of risk becomes more evident. The risks of threat and opportunity are two sides of the same event. Obviously, events and objectives go hand in hand, as your objectives will depend on how you interpret events. What do you think, Peter?
Principal Advisor - Asset Risk & Assurance (Rio Tinto Asset Management)
6 个月I agree with the need for a holistic approach. The portion of the text that resonated with me the most is; "This uncertainty about the future affects goals at every level—individual, team, organizational, and even societal. This requires us to focus on shaping the future rather than merely predicting and/or reacting to it based on past experiences." My thoughts: The goals at every level must be known and function in unison to control uncertainty about the future. We reshape the future by focusing on controls that prevent known hazards that may result in risks. We prevent what we have assessed and know prior to mitigating what cannot or could not be prevented. We can learn from past experiences but it is not necessary to shape our experience of the future. The question then becomes: If we know the hazards and risks, based on catastrophic events of the past, why are they allowed to occur in the present and what does that spell for our future? Can there be a conflict of interest within the holistic approach that stifles learning and knowing which will certainly affect our goals?
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6 个月As the pace of change accelerates, the variable of time on frequency of occurrence, particularly catastrophic events, needs to be shortened.