Using risk behaviour to infer purpose
I used to be a risk manager. Well, I used to define for myself what risk management was and try and get people to pay for my services. Clients and potential clients often had their own notion of what risk management was, and what they wished to pay for. The heart of any divergence between my ideas and theirs is in the identification of the sorts of risk that might need some attention — the risks that actually injure and destroy businesses are rarely on their radar. It sort of makes sense that the risks that are going to kill you are the ones you are blind to.[1]
I have a handy little board book – the kind with some cards on a dinky chain — that I used to hand out to prospective clients. Susannah Finzi and I put it together with a wonderful graphics designer, Terry Cripps. The book boils down what is actually needed to that level of toddler intuitive understanding befitted by a board book with bright designs.[2] The medium may be the message, but nonetheless I will reproduce the boiled down advice here.
Who’s included?
The cost of managing a risk depends on the span of collaboration that can be achieved to address the risk. Risks to performance are:
· Least costly if the parties co-operate in risk management actions
· Somewhat more costly if they are managed coherently by each party separately
· A bit more costly if they are handled piecemeal by the parties internally
· Most costly if the parties disagree on the risks and their management
Since the world is in Brexit mode as I write, we can infer quite easily that the gung-ho “taking back control” that is on offer is the maximally risky strategy: just about guaranteed to fail. Of course, what failure means to the various parties is quite various itself and many parties are being denied a voice altogether. With everybody trying to manage the risks themselves and disagreeing on just about everything, that’s the most costly scenario. This week there has at least been some agreement, on some things, in some places.
When to act?
The complexity and cost of managing a risk goes up the longer it is left unaddressed. Risks are costly to handle and can lead to contract disputes. The cost of handling risk is:
· Smallest before a contract is signed
· Greater once the work is under way but before the impact of the risk occurs
· Much larger once it includes the cost of recovery and re-negotiation
· Larger still if negotiation fails and litigation is brought into play
The risks involved in Brexit should have been handled by safety clauses in the referendum process.[3] The next chance to deal with them properly was before Article 50 was signed. The actual process we are following is just about the most costly and most risky available. One of the principles of risk management is to get the costs of failure dealt with by the perpetrators, like the “polluter pays” principle. In this case the people creating the cost and risk and the people picking up the tab are completely divorced.
There is a slab of evidence that the modus operandi of the oligarchs who rule the world in the shadows have learnt to do precisely this: to get taxpayers to pick up the tab for risks taken in ventures that result in obscene profits.
What is shared?
The cost of managing risk depends on the information that can be shared between the parties. Contract performance and the management of risks to that performance depend on the sharing of information that is rarely disclosed early enough. There are two possibilities:
· This information can be shared in a controlled way that enables risk management to be performed without jeopardising the separate interests of the parties
· This information will come to light in an uncontrolled fashion when risks have already impacted contract performance and new issues are raised by the parties
The current crop of right-wing Tory ministers mostly said that prorogation was inconceivable before they announced they would be doing it. The opposite of sharing information is wilfully and knowingly misleading the other parties in a situation: aka lying and cheating. It absolutely maximises the cost and risk, to the cheaters as much as everyone else. Bold and incredibly stupid.[4]
Building responsiveness
The purpose of a risk management system is to grow a robust response in the organisation to unexpected challenges and opportunities.
· Unplanned challenges and opportunities are a major factor in the environment within which business objectives are pursued
· Groups and stakeholders work out how they will align (or not) their actions in addressing those challenges and opportunities
· The purpose is to develop the ability of the organisation as a whole to respond
The key insight from the politics of the last three years in the UK is that there was always a covert purpose to emasculate parliament as an effective institution. Parliament may or may not recover its ability to act but it is clearly distrusted and disliked by the government.[5] As such no matter what challenge or opportunity comes along it will be unable to be effective. Systems need time to become effective.
The parallel with the US is this. Responsiveness is a long-term strategy, a building for the future. What is happening in the US is predatory delay: a last chance to make a few billion before the basis of the economy is destroyed. Predatory delay destroys capability and responsiveness so the kleptocrats are free to steal public goods with impunity. Trump just got his agriculture secretary to allow the logging of the forests in Alaska, the world’s last great temperate forest.
Improving perspective
The behaviour of people and teams depends on their perception of the risks and rewards to themselves.
· The perception of the risks and rewards in a situation is cyclic and frequently local
· People tend to act in accordance with a relatively narrow view of the risks and opportunities they need to respond to, which in turn affects the risks perceived by others
· Risks to performance become diffuse and disconnected from real business priorities
Is this cursory exploration about Brexit? Well, Brexit is an opportunity for hedge fund managers, and disaster capitalists in general, to make a quick killing on the insider trading. It is also a massive distraction from the politics that matters in the medium term, which is the destruction of political accountability from policies of austerity and exploitation and destruction of the social safety net.
If we focus too narrowly, we miss the picture of what must actually be fought for. There is no bringing back the Amazon rainforest, the forest of Alaska, or the Greenland ice. And the ability to protect those things in the last chance saloon depends precisely on political capability to maintain what matters, in our best interests, as distinct from what sociopathic kleptocrats are currently able to persuade us.
20 things to manage
Performance improvement depends on identifying and addressing the risks to performance goals.
· Managing risks is not cost free in the short term
· Risks are selected for management action guided in part by which of them can in practice be positively (and measurably) impacted by management action
· The aim is always improved performance towards business objectives
Going back to the notion that the risks that do the damage are the ones we don’t see yet, I used to say that the key insight into risk management was whether, with hindsight, it had picked up what mattered. 20 things to manage means that you had better pick the twenty that matter. It is generally not helpful to look back at mistakes that were made, but the exception is to assess your risk management capability. If we are persistently blind-sided and caught on the hop, then we sort of know that we are going to get wiped out.
The government record with Brexit is that it has been wrong every time about what it needed to deal with. Cameron got is wrong completely, May just kicked the can down the road and now we have the worst of all possible worlds, with government being run by an unelected and ruthless schemer in Dominic Cummings.[6]
Of course, the kleptocrats pulling the strings and funding the idiots don’t care about that. They need the destruction of political capability and don’t care how it happens.
The historical view
We only have to look at Hong Kong to see what it means to fight for political freedoms. And to fight intelligently, persistently, and effectively. It scares me rigid. Does the Chinese government know best and have the interests of Hong Kong citizens at heart?
It is too long since the population of the UK had to fight for its political freedoms. Other countries have more recent experience of the need to insist that government is for citizens, on their behalf. We are asked to believe that markets will deliver freedoms, that technology will solve the problems that arise, that the enemy without is responsible for all our woes. That is simply infantile and leaves us infantilised. If I want a government that will be held to account, I need to see myself and yourself as citizens with every bit as much insight as a government minister or senior civil servant. That is what we have lost.
The web of kleptocrats is far from seamless but it is certainly global. They recognise their own kind as well as competing for killings. They know they are all threatened by any sort of citizen power and any sort of transparency about the deals that are done. The Cambridge Analytica story is only one of many companies that have been created to make it look as if democracy is being respected while in reality elections and referenda are being bought.
If the threat is global then the response too must have global capability. There are indeed networks of brave people who make sure that there is real information about what is going on. There are people who will help organise and resist oppression. There are people who know that we stand or fall together.
POSIWID again
The Purpose of a System is What it Does. Why are we looking at the risk management choices made around Brexit? Because they reveal that what is going on can have nothing to do with delivering an exit from the EU that is to the advantage of the UK. What the system is actually doing, consistently over three years, is making sure that the exit that happens is not advantageous. Its purpose must lie, and does lie, elsewhere.
That is a crucial insight because only by understanding what the government is trying to do can we regain our critical distance and our ability to think about where our interests lie in these chaotic times. When government is lying, cheating, and blustering, it is very difficult for law abiding citizens to re-orient themselves and make it clear that they know where their interests lie, and that it is not what they are being told.
The main choreography of all this is the now infamous MSM, mainstream media. The stories they pull together with their entirely spurious balance and precisely designed to keep us off balance. For instance, after years and years of being fed tendentious lies by “think tanks” funded by undeclared donors, the BBC have finally conceded under pressure that these think tanks are not simply sources of analysis and thinking. The Adam Smith Institute, the Taxpayers Alliance, and their likes are channels for misinformation that the government finds very handy.
Distancing from the narrative put forward by the MSM is hard. Take migration as an example. Even people who would welcome refugees into their own homes with open arms are still susceptible to stories of being invaded or swamped. There is still hysteria about ten people in a boat crossing the channel, and hysteria of course is precisely a mass emotion, one that people get caught up in even when it does not fit with their rational views.
What we present here is a different narrative that says that these things we are told daily cannot possibly be even a slanted representation of what is actually controlling the situation. We need all the tools at our disposal to think different thoughts and keep our feet in the melee. We thought purging senior politicians belonged to China!
[1] In Fooled by Randomness, Nassim Taleb wrote about the existential and significant risks faced by the Las Vegas casino industry. Of the six major events and near-misses that came to light, none of them were being managed or even acknowledged by the casinos…
[2] Of course, the internet is awash with ELI5 videos that seek to “Explain Like I’m Five” particular topics.
[3] Though the government of the day may have thought that making a referendum explicitly non-binding was safety enough…
[4] Noteworthy that there are few (no?) signed sworn statements to support the government position in the ongoing court case. It seems that lying to the public is less risky than lying to the courts…
[5] This week’s sessions in the House of Commons have shown this mistrust to be mutual, from both sides of the aisle…
[6] One of the Tory ‘rebels’, on discovering that he’d been quietly removed from the membership of the Conservative party, tweeted that, at last, he had something in common with Dominic Cummings. In the House yesterday, Jeremy Corbyn praised Mrs. May’s relatively transparent deal-making, contrasting it with Mr. Johnson’s mystery strategy, widely believed to be a vaporous cunning plan of Mr. Cummings.
