Dealing with Complicated and Complex Risks

Authored by: Dr. Les Carlo, IRMSA Risk Intelligence Committee Advisor
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The advent of COVID-19 in South Africa has changed the landscape of risks irrevocably. It has brought home the importance of managing COVID-19 as a complex problem.

From a risk perspective, it must shift focus onto a system of complicated or complex risks and opportunities. In looking once again at the 2020 IRMSA Risk Report it is clear that there is guidance on how to approach complicated and complex risks, but is it enough?

Does the narrative “Navigating Complexity: The Frontier of Risk Management” tell us enough?

The comparison between Complicated Systems and Complex Systems is detailed and powerful in helping to understand what is being dealt with when analysing problems.

Given that a risk is in fact a problem that has yet to materialise, it can be usefully applied when adding one extra dimension.

That is that in the case of a complicated risk, it must still be properly defined to avoid the potential to solve it incorrectly.

This also applies to complex risks except that the “multiple non-linearly connected parts” or at least one of them must be subjected to an adequate definition if the system and hence the risk is to be positively influenced.

The concept of defining the complicated risk is within the grasp of all of us. Having said that the risk report brings home the importance of understanding systems theory as a key tool in hands of a modern day risk practitioner or manager.

But understanding systems theory alone, which is important, this does not help with addressing complex risks, and hence the relevance of the “Cynefin Sensemaking Framework”.

Does the “Cynefin Sensemaking Framework” as described therein do to help the risk practitioner or risk manager in the important role that they must play now?

It does in terms of differentiating a complex risk, and in helps in what to See, Attend To and Act Upon when faced with one.
But does it help with how to address a complex risk in a way that will result in improved management of it?

It is suggested two concepts need to be added to enable effective management.

Firstly at least one or more of the “multiple linearly connected parts” of the system exposed to the risk need to be sufficiently defined to the extent that they can be positively influenced towards a better outcome.

Secondly, once there is improved definition, an approach that will deliver an improved outcome needs to be selected and applied. In 1994 R. L. Ackoff in a paper on Systems Thinking and Thinking Systems suggested the following way of treating messy (or complex) problems.

• Absolution: To ignore the problem or mess; to hope that it will take care of itself or go away.
• Resolution: To do something that yield an outcome that’s good enough, that satisfices.
• Solution: To do something that yields or comes close enough to the best possible outcome, that optimises.
• Dissolution: To redesign either the entity that has the problem or mess, or its environment, in such a way as to eliminate the problem or mess and enable the system involved to better in the future than the best it can do today, in a word to idealize.

Consider what the Government of South Africa has done to respond initially to the effect of COVID-19 on the complex systems that make up our society.

They have defined that physical contact is one facet of the complex problem, and have effected a temporary change to the environment. In other words they have applied the lockdown regulations and in doing so influenced but not solved the problem.

In conclusion, it is important for risk practitioners and risk managers to at least understand the basics of Systems Theory, something that IRMSA can include in its training programmes.

Also, to address risks we need to do a very basic thing and that is to properly define the complicated risk or that part of the complex system that is to be treated.

Finally, in the case of a complex risk, chose the approach towards treating it that fits the organisation to which it is exposed and possibly use one of the ways stipulated by Ackoff.    

ENDS
 
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