Black Swan – Expect the Unexpected
Following the tragic events in Las Vegas on Sunday 01st October, where 59 people were killed and a further 527 people were injured after Stephen Paddock opened fire on an open-air country music festival (attended by 20,000 people) from the 32nd floor of the Mandalay Bay hotel on the Las Vegas strip. This horrific incident is the deadliest mass shooting in modern US history and has once again sparked the national discussion on the need to change gun control policy.
These types of cataclysmic events are often referred to as a ‘black swan’; a term which originates from a period when it was widely accepted that all swans were white. This world view was turned on its head in 1697 when Dutch explorers discovered black swans in Western Australia. Ever since, ‘black swan’ has been used to describe an event with widespread ramifications that was previously assumed to be impossible, yet with hindsight seems almost inevitable.
The outbreak of World War One following the assassination of Franz Ferdinand. The Wall Street crash of 1929 which instigated the Great Depression. These ‘black swan events’ had a profound impact on the social, political and economical dynamics that people previously thought of as unshakeable. When you witness natural disasters such as Hurricane Harvey and Hurricane Irma devastating the US and Caribbean, compounded with the geopolitical and financial ramifications of Brexit, the rise of radical terrorist groups such as ISIL, the ever-increasing scope of cybercriminals and the recent shooting in Las Vegas, it has become increasingly difficult to anticipate when and where the next black swan event will manifest.
How do businesses plan for the next black swan event?
In recent years Nassim Nicholas Talib addressed these concerns within his book, The Black Swan: The Impact of the Highly Improbable, wherein he discussed the notion of a highly improbable event that would be extremely difficult to predict. Talib highlighted the importance of taking advantage of these uncertainties rather than trying to predict everything.
Unfortunately, the question that often arises with regards to black swan events is; how do you prepare for a totally unprecedented incident? To ensure that your business or family can weather the storm and mitigate the damages of any social, political or economical black swan event, it is vital that you focus on implementing sufficient risk management policies and business contingency plans. Rather than trying to anticipate what the next black swan event will be, it is essential that you devise/execute a plan that will be applicable for any crisis and importantly, work for you.
One of the most well known black swan events in history has been the sinking of the Titanic in the North Atlantic Ocean on April 14th, 1912. Before its ill-fated maiden voyage, the Titanic was the largest passenger line in service and was heralded as ‘The Unsinkable Ship’ due to the fact that it had been fitted with sixteen watertight compartments on its hull. Each of these compartments was fitted with a set of doors that would close if water entered them, thus assuring passengers and crew that the Titanic would remain afloat if it sustained damage.
Unfortunately, the Titanic hit an iceberg whilst travelling at maximum speed which buckled her starboard side and flooded five of these sixteen compartments. The Titanic had been designed to stay afloat with four of her sixteen compartments flooded but no more. Moreover, the Titanic’s lifeboat system had only been designed to ferry passengers to nearby rescue vessels and a lack of sufficient evacuation management meant that many lifeboats were launched into the sea before they were completely full. As a result, when the Titanic finally sank, over a thousand passengers and crew remained on board. Out of a total 2,208 people on board, 1,503 died and the sinking of the Titanic resonates as one of the most devastating maritime incidents in history.
The unprecedented sinking of the Titanic highlights the importance of devising all-encompassing contingency plans and efficient management policies. By strengthening the overall infrastructure of your company rather than trying to predict the next event, you can minimize the damages that your business would sustain during a black swan event and maximize the effectiveness of your response to the crisis at hand. As Mark Adair, a senior associate at Mason Hayes & Curran, stresses;
“Companies need to undertake detailed planning. The plans should identify what the company’s high priority data and services are. They should afford these assets extra protection, and make restoring them during or after an attack a ‘priority one’ task. Business continuity plans and disaster recovery plans should not be theoretical – they need to be tested and dry-run at regular intervals and updated following the outcome of the test”.
By highlighting potential areas of concern and anticipating how these vulnerabilities could succumb to a black swan event, businesses can implement realistic contingency plans that will lessen damages should a crisis occur. As Steen Jakobsen, chief investment officer at Denmark’s Saxo Bank, highlights;
“It’s all about forcing people to look at the world slightly differently…The world is too complacent and too many people spend too much time projecting the past into the future”.
Upon implementing safeguards across all aspects of your business it is essential that you;
Highlight potential areas of vulnerability – Scrutinise your company’s daily administrative processes, employee training programs and existing security protocols. It is incredibly difficult to anticipate from where the next black swan event will arise but by strengthening all aspects of your organisation you can weather the storm better than your industry competitors.
Take advantage of external resources – Consult with specialists who can assist with the enhanced protection of your company’s valuable assets. From hiring external surveyors to run risk management tests on your business, to recruiting security experts who will train your staff on how to identify a broad spectrum of threats, by taking advantage of these external resources you can open your eyes to potential vulnerabilities that you would not have previously anticipated.
Question assumptions – Do not presume that your company’s security protocols are fireproof. Role play potential responses to different crises and plan multiple back-ups and disaster recovery management processes. Never assume that your work is done. Stock markets shift, consumer trends fluctuate and unprecedented natural disasters can suddenly strike so it is important to implement precautionary measures that are applicable for a wide range of potential crises.
Assign roles in case of crisis – Should the worst happen it is vital that your business can jump into action in order to minimise damages and expedite recovery. For these reasons it is imperative that you pre-emptively create crisis response teams who will have been extensively briefed on their roles and responsibilities prior to a black swan event.
Ultimately, by implementing pre-emptive and reactive strategies that allocate for sudden, undetectable black swan events, businesses can mitigate damages from all manner of social, economic and political crises. Moreover, preparing for these worst case scenarios may even highlight avenues for potential profit that your market competitors would have otherwise overlooked!