To guard against "black swan" events, companies can assess their global exposure to "resiliency risk."
Last week, I had a great follow-up conversation with Matthew Le Merle of Booz & Co., prompted by my post on a white paper he authored for the consultancy. The paper was titled "Are You Ready for a Black Swan? Stress-Testing the Enterprise with Disrupter Analysis" and it laid out a methodology for global corporations to mitigate the impact of "black swans" — unforeseen events that can have cataclysmic consequences.
One of the things that Le Merle pointed out was that disrupter analysis can reveal greater "risk concentration" in an enterprise than was previously known. I thought this was stunning:
Risk concentration shouldn't be a revelation. Risk ought to be something that professionals can assess if not completely quantify. If the risk crosses a threshold, then they can abandon the project, trade, whatever. They shouldn't have so thoroughly botched the analysis that a black swan looms.
"Black Swan" encapsulates in a ballet the improbable arrival of the rare bird — and event that's become a source of great concern to companies.
I just came across this Booz & Co. white paper by Matthew Le Merle, a partner in the firm's San Francisco office. Titled "Are You Ready for a Black Swan? Stress-Testing the Enterprise with Disrupter Analysis," it expands on Nassim Nicholas Taleb's book, "The Black Swan," in which Taleb outlined the dreaded black-sawn event. In a nutshell, a black swan shocking and impactful, but — and this is a big but — it's rationalized after the fact. If we had known X,Y,Z, we could have seen it coming.
The general assumption is that black swans are rare. At one point in human history, people weren't sure black swans even existed. However, in terms of the Talebian metaphor, black swan events are supposed to be infrequent. But La Merle points out that, for various reasons, we could be looking at a future that features flocks of black swans: