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Spring Journal

Volume 31, Issue 1

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Monday, 12 March 2018 14:04

'Antifragility' And An Evolutionary Perspective On Risk

In the 21st Century, Organizations Make Their Own Luck

This year’s World Economic Forum Global Risks Report found that two of the most prominent risks for U.S. businesses will be inadequate protection against cyberattacks and the potential environmental disasters stemming from climate change. And these are just the predictable risks. What of the “Black Swans?” – large economic, political and business shocks are hard to predict. In the last decade, we have had the credit crunch in 2008, the Deepwater Horizon oil spill in 2010, the Arab Spring and Fukushima in 2011 and Black Monday in 2015. The report also says that we fail to understand and plan for the systemic risks that arise from the increasingly interconnected networks of digital systems and transport, infrastructure and financial networks. The interconnected nature of these networks increases the chances of cascades; shocks trigger other shocks, affecting supply chains, customers, investors and counterparts elsewhere. The impact of one of these shocks today is more widespread and costly than a decade ago. The more interconnected we are, the more vulnerable we are. The irony of networks is that they both attract and disperse risk.

Businesses have become remarkably adept at understanding how to mitigate risks that can be relatively easily isolated and managed with standard risk management approaches. But it does not help that we often design fragility into our systems and processes, particularly through efficiency and cost-cutting initiatives. Indeed, in a world of increasing risk and rapid change, organizations are regularly slipping up as they struggle to navigate new environments.