Foresight in risk governance Chabane MAZRI IRGC/INERIS TMP meeting, 23-25 June, 2014 Lisboa .

© 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

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Tota

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Risks

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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 Ign

oran

ce

Risk

© international risk governance council IRGC roundtable discussion– June 6th 2014 4

Risk semanticsLevel 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

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Tota

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ce

RiskMultiple terminologies: • New risks• Uncertain risks• Emerging risks• Risky risks

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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.

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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).

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Challenges to risk governance

Cerf.C; Navasky.V (1984). The experts speak. New York: Pantheon books.

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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.

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Let’s look out of the boxInnovation 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.

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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.

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Foresight and risk governance. The second (and last) good news of this speech!

ForesightDeals 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.

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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 Ign

oran

ce

T

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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.

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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?

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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.

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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.