The New Uncertainty: Implications For Business And Society ...

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By Chris Goldspink

?The modern awareness of risk is not about our own experiences or about the current statistical risk image of death, harm and injuries. Rather, it is about an uncertain future. Fear and anxiety of threats about which we are uncertain or ignorant are a great challenge to risk management?The frightening thing is that we don?t know and have no control. We feel like a victim. Therefore the risks are real but also in a way unreal and unintelligible. A main difference from traditional risks is that they are independent of the place in which you live or work. Radiation is spread by wind, toxic materials are spread by rivers and ocean currents, IT viruses are spread by global networks, epidemics are spread by airplane travelers and hate by fanatic groups results in terror attacks??

In this short paragraph, Jan Hovden, at the 6th International CRN workshop in Stockholm in 2004, effectively identifies the dimensions of what I refer to as the new uncertainty. To make them more explicit, the new uncertainty is characterized by:

- Awareness of what Sociologist Ulrich Beck terms the ?risk society?; a society which through its increasingly global operation, gives rise to new hazards, many of which are beyond the means for any individual or even one nation state to influence or control.

- An appreciation that one of the implications of complex systems (economies, ecologies, societies) is intrinsic unpredictability ? uncertainty which cannot be tamed by more information or rational analysis ? accepting Charles Perrow?s the ?normal accident?.

- A loss of faith in science and technology to deliver control ? a growing appreciation of the inevitability of unintended consequences and possible adverse effects of technology have led us to reappraise its value and to understand the downsides as well as the upsides. At the same time a growing appreciation of the fact that science necessarily involves judgments as well as facts and develops through leaps and set-backs has diminished its standing in the common mind.

- Recognition that emotion plays an essential role in guiding how we respond to uncertainty, ambiguity and risk and that this, as authors like Daniel Kahnemann have shown, has distinct upsides and downsides.

The current challenge of climate change presents an ideal basis for illustrating each of these points. There is no better example of the changes Beck was pointing to in coining the term ?risk society? than Climate Change. Climate change is influenced by human activity. Individually, through our day to day choices, and as a consequence of political decision making, we all participate in a set of global activities which threatens our collective future. The hazards it presents operate at many levels from local to global. It is a classic example of an unintended consequence and a ?wicked problem?. Climate and weather have the hallmarks of all complex systems: periods of relative stability punctuated by rapid change. A small change in climate, such as a few degrees warming, may trigger large shifts in weather. The effects can be counterintuitive as where an average global temperature rise may lead to more extreme weather conditions, including more violent cold spells and snow storms or even potentially a mini-ice age in some locations. We cannot tell reliably when the system may change from one pattern to another, or indeed what new pattern may emerge or how stable it will then be. Science cannot reduce the uncertainty around this to a level which many (unrealistically) have come to expect. As a result skeptics gain traction and emotive claims of an international conspiracy among the scientific elite take hold. Under these conditions paradoxes emerge whereby conservative politicians ? erstwhile champions of markets ? argue against the use of market mechanisms, such as carbon taxes, to limit carbon pollution. Meanwhile sectoral interests sway policy so that the capacity of markets to shift capital to exploit the upside (innovate to find ways of reducing fossil fuel dependence or to mitigate the consequences) are undermined by the subsidization of the industries who have polluted at the public cost for decades. These paradoxical responses further deepen the uncertainty ? particularly for investors and industry.

The implications for business and management strategy include:

- Intrinsic uncertainty ? that not able to be tamed by rational analysis ? becomes a key focus for strategy;

- Shorter cycles between uncertain events means increased reliance on a capacity to react and learn and on staff understanding of corporate intent and direction and willingness to ?do what it takes? ;

- Longer term consequences call for methods such as scenario work to extend the foresight horizon;

- The inevitability of unintended consequences of strategic choices calls for deep engagement by staff and stakeholders in order to detect these effects early and manage the tangible and reputational damage that can rapidly follow.

Our organizational form must also change.

- Structure and process must be geared more to resilience rather than efficiency;

- Management style must move beyond the ?manager as hero?, deepening discretionary power and building agency among all employees;

- Corporate Cultures must be ethical, trust based and focused on learning;

- Compliance thinking must be balanced by opportunity management;

- Resilience to uncertainty becomes more of a HR function rather than a traditional ERM systems problem.

We recently interviewed the CEOs of 51 companies listed in the Australian Stock Exchange ASX200 index on their thinking about organizational Resilience. The sample was deliberately biased towards businesses which provided essential and emergency services. The good news is that the majority of these CEOs demonstrated an awareness of the above challenges and demonstrated a clear sense of their implications for business.

It is one thing to be aware, however, and another to put this awareness into effect. With an average tenure of the CEOs in this study being just 4.2 years, it is questionable whether the long term view essential to the establishment of a culture supportive of these capabilities can develop. At the same time, the aging populations in most Western Democracies mean that CEOs face growing pressure from superannuated investors for certainty of results. This also tends to drive a short term focus and conspires to further undermine the economy?s capacity to respond to global uncertainty. These are the ingredients of social and economic decline. They are trends which should concern us all and which are deserving of a high priority from a policy perspective because the way they unfold over the next decade will determine our economic and social fate for a long time to come.

The emergence of new global hazards that largely result from human action, combined with the realization that the certainty once promised by science and technology is naive and unachievable, leads us to realize that we are ill prepared. Few Government or business systems are designed to deal with this reality. Their recognition implies that business as usual is a recipe for inevitable decline in our standard of living. To avoid this citizens and Business need to demand that Government prioritize long term issues not opportunistic targets. At the same time and in the same way investors and customers ? and this means all of us ? must demand from business a focus on long term viability.

Dr Chris Goldspink is a Director with the Sydney Australia based research and consulting firm Incept Labs. An expert in organizational and social change, he has supported Corporates and Government in the change process for over 20 years. His research is highly trans-disciplinary, spanning psychology, sociology, ecology, cognitive, organization and complexity science.

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