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© international risk governance council IRGC roundtable discussion– June 6th 2014 1
Foresight in risk governance
Chabane MAZRIIRGC/INERIS
TMP meeting, 23-25 June, 2014Lisboa.
EPFL, CM 1-517, 1015 Lausanne, Switzerland | tel +41 (0)21 693 8290 | www.irgc.org
© international risk governance council IRGC roundtable discussion– June 6th 2014 2
Key challenges in risk governance
Effects of uncertainty on objectives.
Combination of the consequences of an event and the associated
likelihood of occurrence.
(ISO, 2009)
Risk
Level 1 Level 2 Level 3 Level 4
Deep Uncertainty
Context
A clear enough future Alternate futures(with probabilities)
A multiplicity of plausible futures
Unknown future
Det
erm
inis
m
Tota
l Ig
no
ran
ce
Risks
© international risk governance council IRGC roundtable discussion– June 6th 2014 3
Risk semantics
Uncertainty about and severity of the consequence of an event or an activity with respect to something
that human values (Aven and Renn, 2011).
Effects of uncertainty on objectives.
Combination of the consequences of an event and the associated
likelihood of occurrence.
(ISO, 2009)
Risk
Level 1 Level 2 Level 3 Level 4
Deep Uncertainty
Context
A clear enough future Alternate futures(with probabilities)
A multiplicity of plausible futures
Unknown future
Det
erm
inis
m
Tota
l Ig
no
ran
ce
Risk
© international risk governance council IRGC roundtable discussion– June 6th 2014 4
Risk semantics
Level 1 Level 2 Level 3 Level 4
Deep Uncertainty
Context
A clear enough future Alternate futures(with probabilities)
A multiplicity of plausible futures
Unknown future
Det
erm
inis
m
Tota
l Ig
no
ran
ce
RiskMultiple terminologies: • New risks• Uncertain risks• Emerging risks• Risky risks
© international risk governance council IRGC roundtable discussion– June 6th 2014 5
Challenges in risk governance Uncertainty
Lack of knowledge Indeterminacy Variability in vulnerabilities and behaviours.
Complexity Multiple and intractable set of interactions. Emergence of new properties. Non linearity.
Dynamic environments. Increased pace of innovation. Worldwide competitiveness. New needs and behaviours.
Legitimacy of decisions Not inherited, to be built! Inclusiveness. Conflicts in values and rationalities.
© international risk governance council IRGC roundtable discussion– June 6th 2014 6
Challenges in risk governance
Uncertainty, Complexity and Legitimacy appeal for:• More precaution, less risks.• Careful and in-depth analysis
of mechanisms and interactions at hand.
• Enhanced risk communication.• More participatory (costly and
risky) decision processes.
Dynamic and highly innovative environments requires to:• be the first to sense and seize
the opportunities;• demonstrate rapid profitability;• Early recognition and integration
of risks (safe design).
© international risk governance council IRGC roundtable discussion– June 6th 2014 7
Challenges to risk governance
Cerf.C; Navasky.V (1984). The experts speak. New York: Pantheon books.
© international risk governance council IRGC roundtable discussion– June 6th 2014 8
Let’s look out of the box The first good news of this speech!
Risk managers are not the only folks confronted with this
dilemma!!!
Dynamic capabilities literature Doing business is confronted with fast moving, uncertain and complex
environment (Teece, 2007). Organisations need to create the capabilities allowing:
The understanding of organisation’s complex environment. Being the first to sense, filter, shape and seize business opportunities.
Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfundations of (sustainable) entreprise performance. Strategic management journal 28 , 1319-1350.
© international risk governance council IRGC roundtable discussion– June 6th 2014 9
Let’s look out of the box
Innovation management literature Innovation is a key target of many organisations
strategies, ranging from SMEs to countries! Environmental factors driving innovation.
Sheth, J. N., Ram, R. (1987). Bringing innovation to market: How to break corporate and customers barriers. New York, Wiley.
Framework for managing innovation.
Goffin, K., Michell, R. (2010). Strategy and implementation using the penthatlon framework. 2nd edition. Palgrave Macmilian.
© international risk governance council IRGC roundtable discussion– June 6th 2014 10
What’s in common? Environmental trends
Complexity, uncertainty, high competitiveness.
Technical requirements Sensing “business opportunities”, “forthcoming risks”, “innovative ideas”.
Detect, scan, scroll the environmental trends. Understand their meaning for the organisation.
Filtering Impossible to investigate all business opportunities, forthcoming risks or
innovative ideas. Select the golden nuggets.
Deciding and acting consequently Shape business opportunities, implement innovation, select risk management
options.
Organisational requirements Strong push from strategic decision making level. Cross functional thinking. Deploy adapted incentives and rewards systems.
© international risk governance council IRGC roundtable discussion– June 6th 2014 11
What’s in common? Environmental trends
Complexity, uncertainty, high competitiveness.
Technical requirements Sensing “business opportunities”, “forthcoming risks”, “innovative ideas”.
Detect, scan, scroll the environmental trends. Sensemaking: Understand their meaning for the organisation.
Filtering Impossible to investigate all business opportunities, forthcoming risks or
innovative ideas. Select the golden nuggets.
Deciding and acting consequently Shape business opportunities, implement innovation, select risk management
options.
Organisational requirements Strong push from strategic decision making level. Cross functional thinking. Deploy adapted incentives and rewards systems.
© international risk governance council IRGC roundtable discussion– June 6th 2014 12
Foresight and risk governance. The second (and last) good news of this speech!
Foresight
Deals with the identification, assessment and usage of weak signals to recognize and give warning about threats and opportunities at an early
stage (Rohrbeck, Arnold and Heuer; 2007).
Methods and frameworks for early (weak) signals detection, interpretation.
Weak signal theory
Methods and frameworks to understand how signals may evolve and combine to shape the future of organisation’s environment
Scenario building,
future studies.
© international risk governance council IRGC roundtable discussion– June 6th 2014 13
Foresight and risk governance.What added value to risk governance?
Shorten delays between the apparition of first signals of risk and engaging in risk management actions.
Level 1 Level 2 Level 3 Level 4
Deep Uncertainty
Context
A clear enough future Alternate futures(with probabilities)
A multiplicity of plausible futures
Unknown future
Det
erm
inis
m
Tota
l Ig
no
ran
ce
T
© international risk governance council IRGC roundtable discussion– June 6th 2014 14
Foresight and risk governance.What added value to risk governance?
Shorten delays between the apparition of first signals of risk and engaging in risk management actions.
Salverda, J. (2014). Identifying new and emerging risks of substances. Society for Risk Analysis Conference, Istanbul, Turkey.
© international risk governance council IRGC roundtable discussion– June 6th 2014 15
Foresight and risk governance.What added value to risk governance?
Project decision makers in the future decision contexts they may be facing. Describe their possible futures. Help understand the mechanisms at play. Identify early opportunities for acting on
these mechanisms and help shaping a more “friendly” future.
Autonomous cars
What will people be doing with the
saved time?
© international risk governance council IRGC roundtable discussion– June 6th 2014 16
Foresight and risk governance.What added value to risk governance?
Provide decision makers with richer sets of decision options. Escape the dichotomy Precaution and stagnation VS dynamism and risk
taking. Help identifying early opportunities of action. Develop adaptive capabilities through robust decision making.
© international risk governance council IRGC roundtable discussion– June 6th 2014 17
Conclusion.
Risk governance facing key challenges: Deep uncertainty Complexity. Legitimacy.
Provide risk managers with necessary lead time to address.
Of course, important challenges are to be considered at cognitive and organisational levels: Reluctance for change. Organisational willingness to continuously reassess strategic
orientations. Cross functional interaction. Incentives and rewards.