I’ve been teaching a risk management class at Solvay Brussels School (SBS) this week. Teaching these classes always brings home to me how much I love to teach. The exchange, the pace, the ideas … as long as it stays concrete, I really feel as if I’m contributing and learning at the same time, even in my role as the lecturer.
I’ve been lucky to once again find myself with a wonderful group of enthousiastic, intelligent people in the room that are excited to discuss the practical aspects of risk management implementations. Away from just theoretical concepts, away from high level consulting lingo which does not contribute any real added value. Just focusing on how to make it work. Practical risk management, in other words.
One of the aspects we touch on when discussing the practicalities of risk event identification is the aspect of unknown unknowns. These are, very simply put, the risks we never saw coming. While they only represent a minority of all risks, they usually wreak havoc on your activities and its related operational and strategic objectives, because you quite often have not built any risk mitigating measures to deal with them.
“He saw it coming, he only had himself to blame”
During the discussion, we agreed that hindsight on unknown unknowns is almost always 20/20. It’s relatively easy to look back and ‘see it coming’, with all the information transparantly available to you. However, looking forward, you don’t have that luxury.
Making an unknown unknown
So let’s consider what makes an unknown unknown so hard or even impossible to know? I consider the following three elements to be among the determining elements of an unknown unknown.
Aspect 1 – Time to onset
Some unknown unknowns move very fast. The time you have between the first moment you could have theoretically identified the risk and the actually occurrence of the risk event, i.e. after it would have blown through all your measures aimed at reducing the likelihood of occurrence, is very short. This “time to onset” determines whether it is at all feasible to start up any risk mitigation activities.
If you want to visualize this, think Wiley Coyote hanging over the abyss with a text balloon over his head saying ‘oh darn’ … these are the moments you know the worst is yet to come, and that you do not have anywhere close to adequate time left to handle the issue.
Aspect 2 – Available expertise
Looking back with the required expertise is easy. After all, you know what has happened and you bring in the experts to expound on why this happened and how it could have been avoided. Network TV is often especially strong at this, in cases where the resulting exposure to the risk is big enough to put egg on a lot of faces.
However, the likelihood you have the expertise available to examine every possible risk before any such risk occurs is unlikely. Expertise is expensive, and especially if a risk is in the perifery of your activities, it is possible you never had access to the required expertise to begin with.
This really becomes a problem if the expertise is available in your organization, but silo mentality and the lack of communication across organizational or hierarchical chasms has prevented the both of you from talking to each other.
In essence, the reality is that you will never have all the expertise required to assess all possible theoretical eventualities.
Aspect 3 – Required width and depth
But even if you were to have access to all expertise required, unknown unknowns are still very much a reality you will have to deal with. You simply cannot keep your eye on everything all the time. In essence, an unknown unknown risk event has to get lucky once. You, on the contrary, need to be lucky all the time.
Monday morning quarterbacking gives a lot of people a feeling of control. I believe a lot of that is psychological. It is very hard to admit to ourselves that there are things we will never see coming, and those are the risk events that often hit us hardest.
For us, as a human species, as a result of our nature, it is a lot less scary to create that false sense of security that it is a personal or structural failing rather than a fact of life that sometimes the comet is real, and sometimes it is heading for us with nothing we can do about it … without us even knowing about it.