RISK AND REALITY: Risk Management Related Syndromes and Their Cure

Risk and Reality with Franco Oboni, Ph.D.

Hazards have to be treated transparently, which of course does not exclude confidentiality, in order to avoid various well known organizational risk-related money wasting syndromes which we will summarize in three points:

The “specialist syndrome”: this syndrome leads hazard specialists of a given hazard, for example IT, military, political, or financial experts to believe they understand how to evaluate risks. They do not! What they can do is characterize the hazard they specialize in, but they simply do not know how to quantify, prioritize risks. We will not cite again the sub-prime/banking disaster, but let’s put in in simple terms: a car mechanic is not necessarily a racing pilot, right?

The “denial syndrome”: This syndrome is exemplified by the classic “it will not happen to me: I am too large, too small, it can only happen to others etc.” Well, invincible banks went on their knees, small Mom & Pop businesses were forced to shut…entire industries collapse…it will happen to you whether you like it or not, so stop procrastinating or looking into your horoscope! Get real and prepare.

The “technology fix-it-all syndrome”: This syndrome leads to the classic excesses driven by “hardware/gear” vendors and other biased parties who want to erase aspects of the hazards, but miss the true nature of the risks. History is full of invincible castles (I am not referring to Douglas Castle here) who were seized in a day, starting from Troy on; unsinkable vessels, who sank miserably; invincible armies who starved or froze to death too far away from a logistic base (Russian campaign(s) etc.). Furthermore, examples abound of laws and decrees aimed at solving one situation, then backfiring on another; parking planes close together to avoid “local sabotage” in Pearl Harbor, only to offer an easy prey to the Imperial Air Force, etc.

Can we cure these syndromes?

Of course we can..and here we summarize how:

• In a well managed organization hazard specialists should define the hazards, their magnitude, and to a certain extent, with facilitation, the likelihood of a strike.
• Then a Risk Manager will determine the risk posed by these hazards, after helping to evaluate probabilities and potential consequences of the hazards hitting the system. Finally a risk estimation will be delivered in a clear and transparent way, compared to the organization’s explicit and quantitative tolerabity threshold. A that point it will be possible to know which mitigations have to be implemented, if any, and a road map will be defined.
• In a well managed organization a preliminary risk assessment (see the two points above) will allow to evaluate which risks are relevant and should be tackled. This will result from a comparison of the evaluated risks with the organization’s tolerability curve, an exercise that has to be developed quantitatively and transparently in order to avoid biases of various nature.
• In a well managed organization prestige, arrogance and self-praise will be kept at bay by unbiased, transparent evaluations.
• A good Risk and Crisis Management approach will ensure the balance of the mitigative measures.
• No good mitigation can be implemented unless a serious Risk Management approach weights the residual risks, and secondary effects.

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RISK AND REALITY: Risk Management Related Syndromes and Their Cure

RISK AND REALITY: Do You Still Think Crises Are Mere Consultants’ Creatures?

Risk and Reality with Franco Oboni, Ph.D.

Well, all along our professional life of Risk and Crisis Management consultants and coaches we have been confronted with clients that expressed themselves with statements like: “well, you know, this kind of stuff only happens to others”, generally followed by “we are too small, … too large, too smart, too powerful”, etc. (please refer to http://theglobalfuturist.blogspot.com/2009/10/16-phrases-to-illustrate-some-human.html for more details).
Relentlessly we have kept our stance: crises are foreseeable, crises can be as costly as a natural disaster or a major accident, the public IS THE JUDGE, and the sentences he delivers cannot be appealed etc.
Examples abound in our courses and our latest book, but the one that follows is exceptional for many aspects.

United Airlines Lost $180 Million due to YouTube Video

We learned about this crisis as everyone else, via the media reporting in the morning news about how social media can seriously damage a brand.

The Story

Take a musician (Mr Dave Carroll, from Canada) going to a concert, who sees the airline ground crews manhandling his instrument (a beloved guitar) to its death (broken neck, fatal wound indeed).
Imagine other passengers witnessing the massacre under the indifferent look of totally uninterested flight crew zombies.
Mix to this an interminable series of communications between the victim and a ice cold airline management who refuses to take any responsibility.
Bad enough? Well, yes, for the victim, for sure; but the airline had no clue how bad things were going to turn for them!

You see, our victim-musician had the interesting idea to make a country tune (titled “United Breaks Guitars” by Dave Carroll ) out of his sad story, and such a nice one, complete with an amusing video, that became an instant success on Youtube (appx 4million views as we speak).

The Results

United Airlines share price dropping by 10% (i.e. 180MUS$ loss), equivalent to over 50,000 replacement of the defunct guitar. I do not think any Court would have punished so harshly the airline, but this is the power of the public-JUDGE: exemplary punishements and NO APPEAL.

Conclusions

In the era of internet, social media and networks, there is no hiding, there is no mercy for the culprits. And in period of exacerbated sensitivity to poor corporate behavior, like amidst a recession, and in the aftermath of large scandals (Madoff, banks etc.), punishments are going to get tougher and tougher.

There used to be a saying that one happy customer would report to three other people, but an unhappy one would spell his story to seven. Well, welcome to the world where a bad story can be broadcasted or is echoed out to four million within days, and for free!

For more information, please visit Franco's BIO.

Editor's note: Franco also does fiction. The Omani Link ... an Interactive Story began on October 20, 2009.

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RISK AND REALITY: Do You Still Think Crises Are Mere Consultants’ Creatures?

NIGHTMARES OF NETWORKING: Taxing Your Brain

Nightmares of Networking

with "The Mad Genius"

Why hello my id driven synaptically deficient plebe! The Mad Genius is glad to see your somewhat misanthropic visage on this beautiful autumnal day, and not only as a distraction from me working on my taxes: do you think my atom smasher would qualify for a Section 179 “Accelerated Deduction”? I could definitely get that through an audit: the average revenue agent makes you look like an evolutionary marvel of cranial capacity.

Of course I do my own taxes, at least the initial iteration. As Einstein said: the single most difficult thing to understand is the US Tax Code. Since it contains more verbiage than the entire Library of Alexandria, and is in such constant flux that even those that oversee it do not even comprehend the potential imbedded in this perversely complicated document, I actually feel a moral and intellectual obligation to fully utilize the exclusions, deductions, loop holes and wormholes they have created. Just like Neo, I did not write the code but I know how to exploit it. And yes, I know kung fu.

Sit down, let us derive sustenance from a malted hops beverage and catch up on what you have achieved, beyond the remarkable fact that you tied your own shoes and were able to walk up the stairs while masticating without damaging yourself or my blown glass Jedi/Sith chess set. Just move that pile of printouts off the seat, it is validation for all of my deductions for my CPA so that she can sign off and use her letters to provide a level of protection in case the walking monetary vacuums from Washington decide to audit me. They question that which they do not comprehend...

You know my little padwan, CPA's are critically important even if they are just glorified bean counters that will tell you how much tax you have to pay instead of being proactive and helping you not accrue the tax in the first place. They create a line of defence with their knowledge of a convoluted tome, an esoteric area of knowledge. Similar to being able to repeat the names of all the Pokeman or the statistics of the 1962 Cardinals, but without the stupid cards and with a somewhat greater ramification for failure. Similar to attorneys: the only “profession” whose sole job is to protect you from other members of their profession. Except maybe mercenaries. Hmm, Zevon was correct. Lawyers, guns, and money.

But I always stay within the artificial constraints of human law. Why? Because I can win the game given the constraints they have put in place. Why risk a violation and the results, when the game can still be won even within the sometimes ludicrous shackles imposed? And it is even better to create solutions that the framers of the rules never contemplated, that are beyond their ability to relegate because you are on the section on their mental map that says “Here there be dragons.” Boggles their tiny little minds. They are right though: this unknown area is where the wise and powerful reside, my oligarchic peers and I. Maybe someday you can join us, if you are not devoured while small and young and weak as you are.

Since you are not excessively intelligent and actually need this thing called “sleep”, you should probably continue to build alliances to protect your gluteus maximus. You do not have the time, intelligence obviously, and other resources to go it on your own. You need to build a network of experts around you. Attorneys, accountants, professional hitmen... all the important skill sets that it is better to delegate out because of time needed to master or downside risk potential.

Long ago in my wild youth I knew a successful individual who let their ego overtake their capabilities outside their focus area, and they questioned my advice, looking for a cheaper and less radical alternative to my guidance. They found their cheaper advice with a less intelligent person, a Non-Mad Average Guy who did not fully comprehend the intricacies of our planning. And he made the average mistakes, to the tune of losing a third of what they sought to protect. They basically paid a Stupid Tax. Blake stated the theorem properly: a little knowledge is a dangerous thing, drink deeply or touch not the Pyrrhic Spring. Do not follow in these fools' steps: build relationships with those of excellence within skill sets you do not have but will value. Allow them to advise you on your direction, but ultimately be able to make your own decision and accept the consequences. By allowing a team of disparate experts to input into the discussion you garner greater knowledge to synthesize a better solution. Utilizing this Master Mind concept a la Carnegie will move you towards an optimal solution, and liberate temporal units for you to allocate towards more important things, like maybe how to dress yourself or reviewing your lessons with me. Let the experts do what they do so that you can do what you do, whatever that is.

Well, my beverage is done and the game with the Service awaits. Contemplate on our discussion as you wind your way back down from the lab, but please don't touch the other Storm Trooper pawns on the way down. Maybe on our next visit we can discuss how you have established your junta. Or maybe that too will be a Networking Nightmare....

For more secrets, you may visit the TNNW Bio of "The Mad Genius", if you dare.


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NIGHTMARES OF NETWORKING: Taxing Your Brain