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COMPLEX ENTERPRISE RISK A Short Introduc-on There are three categories of risk. First, risks associated with problems/challenges for which there is a known solu;on that is readily available. The risk is mi;gated by ;mely recogni;on of the problem and applying the solu;on. Second, risks associated with problems/challenges for which a solu;on is available, but which will require the engagement of specialist exper;se in order to address the situa;on. The risk is mi;gated by ;mely detec;on and analysis of the problem, recognising that specialist help is needed, and quickly gaining access to the necessary exper;se. Standard risk management systems and protocols, as used by most organisa;ons, are adequate for addressing both these categories of risk exposure. Level 3, IBM Tower 60 City Rd, Southbank MELBOURNE,VIC 3006, AUSTRALIA www.vucaconcepts.com.au

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Page 1: Complex Risk

COMPLEX  ENTERPRISE  RISK  A  Short  Introduc-on  

There  are  three  categories  of  risk.      

First,  risks  associated  with  problems/challenges  for  which  there  is  a  known  solu;on  that  is  readily  available.    The  risk  is  mi;gated  by  ;mely  recogni;on  of  the  problem  and  applying  the  solu;on.      

Second,  risks  associated  with  problems/challenges  for  which  a  solu;on  is  available,  but  which  will  require  the  engagement  of  specialist  exper;se  in  order  to  address  the  situa;on.    The  risk  is  mi;gated  by  ;mely  detec;on  and  analysis  of  the  problem,  recognising  that  specialist  help  is  needed,  and  quickly  gaining  access  to  the  necessary  exper;se.  

Standard  risk  management  systems  and  protocols,  as  used  by  most  organisa;ons,  are  adequate  for  addressing  both  these  categories  of  risk  exposure.  

Level  3,  IBM  Tower  60  City  Rd,  Southbank    

MELBOURNE,VIC  3006,  AUSTRALIA  www.vucaconcepts.com.au  

Page 2: Complex Risk

There  is  a  third  category,  however,  where  no  apparent  solu;on  is  readily  iden;fiable,  nor  is  there  a  defini;ve  authority  source  to  whom  you  can  turn.    Indeed,  these  problem  situa;ons  generally  tend  to  sit  in  the  background  of  normal  opera;onal  life,  and  in  consequence  tend  to  be  ignored.    This  is  because  you  either  (a)  feel  you  have  more  pressing  immediate  issues  to  deal  with,  or  (b)  find  them  frustra;ngly  intractable,  ;me-­‐consuming,  or  just  plain  ‘messy’.    So,  they  get  ignored  or  ‘put  on  the  back  burner’.    Unfortunately,  they  don’t  go  away  by  magic.        

Instead,  they  tend  to  fester  away  in  the  background,  emerge  from  ;me  to  ;me  in  different  guises,  and  all  the  ;me  eat  away  at  the  produc;ve  capacity  of  the  enterprise.      

The  persistence  of  silos,  low  employee  morale,  strained  rela;ons  with  key  stakeholders,  poor  leadership  prac;ce,  finding  the  right  work-­‐life  balance  for  key  role-­‐holders,  are  cases  in  point.    This  is  the  domain  of  complex  enterprise  risk.    RegreXably,  complex  problems  are  the  ones  that  invariably  keep  you  awake  at  night,  increase  your  stress  levels,  insidiously  diminish  your  mission-­‐effec;veness,  and  end  up  cos;ng  you  serious  money.    In  some  instances,  as  illustrated  by  Sidney  Dekker  in  Dri$  into  Failure,  they  can  result  in  catastrophic  collapse  of  the  business.  

Figure  1  following  provides  a  humorous  illustra;on  of  a  condi;on  that  is  all  too  prevalent  in  many  organisa;ons,  

even  large  corpora;ons  that  consider  themselves  sophis;cated!  

Page 3: Complex Risk

An  all-­‐too-­‐common  source  of  complex  enterprise  risk  !  Figure  1  

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Volatility Uncertainty Complexity Ambiguity  

Fortunately,  recent  advances  in  the  complexity  sciences  

have  combined  to  provide  us  with  a  new  suite  of  

methodologies,  techniques  and  tools  for  the  ;mely  

iden;fica;on,  and  systema;c  unravelling,  of  the  sources  of    complex  enterprise  risk.    

Dr  Robert  Flynn  Melbourne,  Australia  

The  term  ‘complexity  sciences’  is  used  to  describe  a  range  of  disciplines  drawn  from  the  natural  sciences,  the  social  

sciences,  and  the  humani;es.    

Included  in  the  mix  you’ll  find  such  diverse  pla\orms  as  fractal  geometry,  chaos  

theory,  cyberne;cs,  complex  adap;ve  systems  theory,  psychology,  sociology,  cogni;ve  science,  and  

hermeneu;cs.