It’s time to realise risk management’s new potential
Are we living in an increasingly volatile world? Many refer to this as VUCA, or volatility, uncertainty, complexity and ambiguity. It’s a famous phrase when talking about technology, but VUCA – which originated out of business sciences and military theory – has become a familiar tag to try and explain the impact of COVID-19. And we can certainly agree that we’re in a more VUCA world right now than a year ago.
Though even if we look back, this status was claimed throughout modern history. In January 2019, Forbes wrote:
“On the one hand, it seems obvious. Through digitalisation, big data, artificial intelligence, robotisation, (de) globalisation, terrorism, financial crises, climate change and global shifts in power, we feel an increased volatility, uncertainty, complexity, and ambiguity in the world around us. On the other hand, though, such feelings are as old as mankind and we can question whether our situation today is more VUCA than during the Black Death, World Wars I and II or when we discovered that the earth was neither flat nor the center of the universe.”
The article then looks at different times in modern literature that the VUCA concept surfaces, and these go back half a century. So it’s apt to conclude that any time in human history could claim to be in a VUCA space. As the article also points out, these claims were often true. It’s about the context.
But I also think we were wrong. We thought our world was in a VUCA state for several years now, when in fact we were enjoying some remarkable stability. On a broad scope, that stability began after World War 2, effectively meaning nobody alive today had known any other reality. There are, of course, exceptions, such as wars and failed states. But for most of the world, we thought we lived in a VUCA time until the pandemic struck. Now we can see what real volatility, uncertainty, complexity and ambiguity is.
Nothing brings this home more than the sudden jump in risk management’s profile, as well as requirements for the more significant and efficient administration of risks. The words ‘strategy’ and ‘risk’ now appear more routinely in mainstream business discussions, perhaps because forward-looking risk management is one of the few things that can create certainty in a truly VUCA period.
Our collection of blogs in this newsletter reflect on some of that change. For example, robust risk management is now a necessity for medium and small businesses, and enterprise risk wants much more proactive insight to their current and future risk and opportunities. Such attitudes hadn’t emerged before on this scale: not during the 2008 financial crisis, not during the Dot-Com crash, not during Asian financial crisis of the nineties or the events of 1987’s Black Monday.
Are we in a VUCA world? Yes. In the years before 2020, we thought our world was volatile and complex. But we had no real idea what these things truly meant. Now we do, and the world looks towards risk management to steer out of the shoals.
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