Paper explaining the Early Warning System for Unknown risks to an organisation developed by Harding & Yorke in 2010

1. Uncertainty Matters
Building Early Warning Systems for Unknown Risks 1|2
Uncertainty is the new norm
As the way we interact in business
becomes more complex the level of
FSA fines BAE £30m for uncertainty increases. Corporate Boards
inaccurate accounting
are under intense regulatory, financial
records for activities in
Tanzania. BEA also fined
and reputational pressure to grapple
£256m by USA with the double-edged sword of
department of Justice for uncertainty. From a positive perspective,
other false statements.
uncertainty creates more opportunities
Source: FT, 5 Feb 2010
for innovation, but this needs to be tempered with managing an increasing number
Toyota chief is accused of of exposures as unknown risks grow. It is for this reason, uncertainty about the
being 'safety deaf‘ by US future is now firmly on the Chairman’s Office agenda within leading corporates. This
Congress Congressional
paper focuses upon taking proactive action in managing unknown risks.
inquiry as 39 deaths
linked to car accelerator
problems. Source: Daily Unknown risks need to be managed
Telegraph, 25 Feb 2010
Unknown risks typically fall outside conventional risk and control systems, thus
FSA fines Standard Life
‘unexpected’ issues are more frequently being handled by the Chairman’s Office.
£2.45m for serious Unlike conventional risks, unknown risks can be wide reaching with many potential
systems and controls outcomes across the organisation and ecosystem. In the extreme, these risks can
failures Source: FSA , 20
lead to systemic exposures deep within the organisation and marketplace.
Jan 2010
Retrospective regulation such as Sarbanes Oxley removes the safely net of
ignorance as a corporate defence against ‘unforeseeable’ events. With the regulatory
threat of executive imprisonment and the increasing litigious shareholders, the
Chairman’s Office needs more advanced early warning systems of emergent
unknown risks.
Someone knows
The pressure upon the Chairman’s Office is to strengthen their checks and balances
in the way in which the business is managed by the Executive, thus turning the
spotlight on the Risk Committee, who report into the Chairman’s Office. The reality
is, that there is a high likelihood that any emergent risk was already known by
someone within the corporate ecosystem of people either inside or outside the
organisation. The challenge is that the early warning signals are often so weak or not
>>

2. Uncertainty Matters
Building Early Warning Systems for Unknown Risks 1|2
FSA record fine for visible to the Chairman’s Office that issues emerge ‘unexpectedly’. Developing early
individual reaches £967k;
warning indicators for unknown risks requires a new approach, which will affect the whole
CEO of Genel Enerji,
Turkish oil exploration,
organisation. Effective measurement will enable the business to sense and predict
caught dealing shares with emergent patterns and take necessary actions to mitigate against these exposures.
insider information.
Source: Daily Telegraph,
The power of ecosystem anonymity
25 Feb 2010
Employees, customers, partners, suppliers and shareholders all form part of the
Patients die as NHS trusts
organisation’s eco-system that provides a 360º catchment for gathering data intelligence.
miss patient safety alerts. However, it is important to provide a safe harbour in which to communicate. Anonymity
Source: BBC, 16 Feb should be protected to ensure that people provide the most honest and accurate
2010
information without the pressure of being identified. Advanced technologies offer the
IFA Park Row Associates
ability to gather and understand large quantities of data quickly, in a scalable way whilst
has to pay £7.8m in protecting anonymity. This approach strengthens the governance process and
customer redress. stakeholder confidence when combined with positive responsiveness.
Source: City Wire, 24 Feb
2010 A common currency of measurement
Using different feeling based measurements for each group targeted within an ecosystem
enables checks and balances to be inbuilt. This is achieved using a digital survey so
each person is asked to assess ‘how’ and ‘why’ they feel towards risk activities within
their area of interaction. By underpinning each survey with common structure, a universal
currency of measurement can be used.
Managing emergent patterns at the edge
Advanced interactive visualisation can be used to identify emergent patterns, allowing a
rapid way to understand the complexity of the information gathered, providing lead
indicators of perceived risks. Informed decisions can then be taken to undertake deeper
investigations into the root of the issues. Once further evidence has been captured
proactive change can be considered, planned, prioritised and implemented. Intelligence
gathered can also be used for predictions and repeatable benchmarking, providing the
basis for managing the uncertainties around risk. This repeatable process leads to a
greater sense and respond capability for managing uncertainty.
Beyond one method
Meeting the threats of unknown risks means rethinking beyond more conventional risk
Contact us
methods to deal with the increasing levels of complexity and uncertainty. Building early
Harding & Yorke
Stuart Lamb warning systems for unknown risks is fast becoming a must have capability.
t:/ + 44 (0) 1603 507052 Uncertainty matters!
e:/ StuartL@empathy.co.uk
w:/ empathy.co.uk