Cascading Effects Ripple Through Organizations Ill Prepared to Deal with Them
Guest Post by Geary Sikich (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
We live in a world of consequences. Everything that we experience is a consequence of some action, decision, reaction and/or choice. For organizations, the consequences of a choice, action, decision and/or reaction can cascade throughout the organization and extend to its “Value Chain” rippling through all the known touchpoints and the as yet, unidentified touchpoints.
Organizations need to understand their strategic, operational and tactical capabilities and capacity to recognize, mitigate and/or capitalize on cascade effects. As a result of the diverse nature of global business operations, geopolitical circumstances, culture, etc., there currently is a standardization gap with regard to how organizations should react to cascade effects. This is partly due to opacity, nonlinearity and insufficient competitive/business intelligence that organizations can draw from. This is not to say that the information does not exist. Rather that it does not exist in a form that is readily recognizable to organizations in most cases.
Definition and Clarification
Cascading events can be defined as secondary adverse and/or positive events caused by an initial event—natural (e.g. flood, earthquake, discovery of new resources) or man-made (e.g. terrorist attack, medical innovations) technology (e.g. cyber threat, technology innovations) — leading to further subsequent events either positive or negative (e.g. the failure of telecommunication, transport, gas and water resulting from the disruption of power lines; a chemical spill as a consequence of damaged pipelines or the development of cellular capabilities, hybrid automobiles, fiber optics, smart grids, etc.). Human behavior can contribute to positive cascading effects and also mitigate the impact of negative effects. Cascading events generally result in unexpected change; either positive or negative.
We continue to feel the impact of the negative cascade effects from the global financial crisis, yet there have been positive cascade effects too. These are seen in quantitative easing and low interest rates (although not without potential negative cascade effects). The current oil glut has provided consumers with relief at the gas pump; and a squeeze for exploration, production and alternative fuels. How do we advise our organizations with regard to cascade effects? And, how can an organization effectively develop a strategy or strategies for recognizing and gaining competitive advantage as a result of the cascade effect?
“War Gaming” and Failure Point Simulations
The concept of “War Gaming” is to identify how an event would impact the attainment of the organization’s goals and objectives. “Failure Point” simulations seek to identify the various failure points within plans through the use of issues identification, analysis and assessment of decision making ramifications. “War Gaming” is not a new concept. It has been around for a long time and is executed in a myriad of versions by organizations. Typically one can find a vast amount of simulations conducted and mislabeled as “War Games”. This is not due to malicious intent on the part of the organization. It is primarily due to not understanding the difference between simulations that are a demonstration of capability under controlled conditions, generally are linear problem solving focused and rarely focus on anything past the initial response to a situation; versus a structured assessment of possibilities, identification of cascade issues and failure points within current plans, strategies, etc.
The advantage of “Failure Point” simulations is that it frees the organization from linear problem solving and demonstrations of capabilities under controlled conditions.
We need to recognize the effect of opacity and non-linearity due to complexity. Opacity clouds the easy identification of risks and complexity makes single cause analysis a paradigm of the past. Failure Point Exercises have categorized exercise outputs relating to planning functions and the function of plans to include, but are not limited to the following:
- Directing and coordinating the actions of Senior Management Team members
- Directing and coordinating the actions of Business Continuity Team members
- Identification of potential cascade situations, effects and impacts (positive or negative)
- Basis for shared situation awareness
- Generating expectancies
- Supporting improvisation
- Detecting inconsistencies
- Establishing time horizons
- Shaping the thinking of planners
- Identifying a common terminology and classification methodology
We have found that plans differ along some key dimensions:
- How precisely the plan was made
- Whether the plan was modular (relatively independent components that could be implemented as necessary)
- The level of integration of the plan with co-existing plans (security plan, evacuation plan, etc.)
- How well coordination of all elements can be accomplished
- Level of complexity of the plan contents
- Degree of precision (i.e., how many steps you are locked into performing)
Participants generally agree that the benefit of the Failure Point Exercise Methodology is to recast the planning process as a type of problem solving that requires the identification of the nonlinear aspects of problem identification and solution development (Critical Thinking) versus the traditional problem solving performed during drills and exercises that are designed to validate the success of the plan and often explain away any discrepancies that arise. The Failure Point Methodology creates a learning environment that allows planners and plan implementers to break their emotional attachments to the plan’s success and recognize that plans do not necessarily reflect reality, but are our best effort to anticipate disruptive events.
Geary Sikich is a seasoned risk management professional who advises private and public sector executives to develop risk buffering strategies to protect their asset base. With a M.Ed. in Counseling and Guidance, Geary’s focus is human capital: what people think, who they are, what they need and how they communicate. With over 25 years in management consulting as a trusted advisor, crisis manager, senior executive and educator, Geary brings unprecedented value to clients worldwide.
Geary is well-versed in contingency planning, risk management, human resource development, “war gaming,” as well as competitive intelligence, issues analysis, global strategy and identification of transparent vulnerabilities. Geary began his career as an officer in the U.S. Army after completing his BS in Criminology. As a thought leader, Geary leverages his skills in client attraction and the tools of LinkedIn, social media and publishing to help executives in decision analysis, strategy development and risk buffering. A well-known author, his books and articles are readily available on Amazon, Barnes & Noble and the Internet.