In Lewis Carroll’s 1871 novel Through the Looking Glass, Alice and the Red Queen race. At the end of the race, Alice realizes that though they have been running, they haven’t gone anywhere. She laments: “Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else–if you run very fast for a long time, as we’ve been doing.”
“A slow sort of country!” The Red Queen wryly replies. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
Most agree that Carroll uses the looking glass as a metaphor for times when the world suddenly appears unfamiliar, almost as if things turned upside down. In that unfamiliar world, the Red Queen’s Race is a cautionary tale that staying in the same place is falling behind.
We believe that today we’re in another kind of unfamiliar time, and in such times the Red Queen’s caution is especially applicable to the way organizations and their leaders should think about and manage risk.
The world faces a web of simultaneous challenges, each complex in its own right. Geopolitical instability remains rife 30 years after the Cold War and the alleged “end of history.” State-sponsored cyber risk, pandemics, adaptation to climate change, economic retrenchment, accelerating technological change, and demand internalization are all combining to create a risk environment that is unprecedented in terms of the challenges it poses.
After a generation of fairly stable growth, benign globalization, and business collaboration, today’s multinationals face a perfect storm of supply chain volatility, reshoring pressure, and reduced availability of critical inputs.
It’s not simply that we are facing an unprecedented accumulation of risks–it’s that risk itself is different. It is interactive and rapidly changing. In our information-saturated world, it is ubiquitous. It seeps into every aspect of our personal and professional lives.
Most of what we need to do involves changing the way we think about risk.
Some see risk as an inconvenience to be mitigated, while others are overwhelmed, even paralyzed by it. Even sophisticated companies address risk in siloed structures. With no unifying focus, what is a priority to one, may be a negative to another. Increased inventory buffers, production redundancy, or more resilient but higher-priced vendors could mean lower margins. Risk identification processes are stagnant. They take periodic snapshots, relying heavily on qualitative judgments, and the hope that risk is therefore being managed comprehensively.
There are ways to mitigate risk, even to find opportunity in risk. Today, the risk of inaction is much greater than the risk of action. When things are going well, when in a position of relative advantage, it’s natural for us to work hard to preserve the status quo. We have a natural tendency to be more comfortable with information that confirms our biases, seek data that reinforces our beliefs, and listen most closely to those who seek to convince us that near-term challenges will soon be replaced with a return to the “normalcy” that favors us, all of which results in a kind of self-limiting decision making.
The bottom line is that there are things we can do. Failures to accurately assess risk are, at their foundation, failures of imagination. Therefore, organizations should embark on a deliberate “campaign of learning” to build a wider and stronger foundation of relationships and knowledge that allows them to see connections that they may not have otherwise seen.
Senior leaders must recognize and embrace their role as risk managers. Risk management can no longer simply be something provided to senior leaders, it should be driven by them. While Boards and C Suites understand the saliency of risk management, they must inculcate it in their teams’ priorities. Siloed risk functions must operate cohesively so that disparate teams see common threats to operations and supply chains and deploy holistic solutions targeting aggregated risks.
We believe there is a clear and urgent need for uncommon collaborations in risk management. Financial disruptions, national and global security issues, supply chain vulnerabilities, existing and emerging cybersecurity threats, disruptions in food security, sudden and unexpected changes in the environment, and concerns about public health are interrelated like never before and so risk management must become an increasingly collaborative enterprise.
We can avoid the Red Queen’s trap and win the race to reduce our vulnerability to risk and take advantage of the opportunities that arise. That is, if we acknowledge the extent to which things have changed, allow ourselves to be less comfortable in what we think we know, take ownership of the challenge, and act–early and often.
Martin Dempsey served as the 18th chairman of the Joint Chiefs of Staff. Charles Bralver is the co-founder and chairman of Sigma7.
The opinions expressed in Coins2Day.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Coins2Day .
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