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The Dimensions of Risk Management - July 2000 : The Recurring Patterns

By Michael Vincent

26 December, 2006

Last month we looked at the first five recurring patterns as described in "World of Risk" by Mark Haynes Daniell, this month the last five are discussed.  A close examination of the ten patterns creates the environment of the risk manager in the future and illustrates the need for ongoing and continuous education.

 

Ten Recurring Patterns:

The final five:

 

6. Continuous Obsolescence and Reinvention

  

Understanding historical rules is a necessary but no longer sufficient, knowledge base from which effective systemic action can be taken.  New paradigms have redefined the nature of competition and reset challenges for modern managers.

Within a dynamic and complex system as we have today, it is obvious that learning must keep pace with change and even anticipate change for the benefit of the entity.

  

7. Connectivity

  

Here the thrust is "We are talking about connecting everything in the world to everything else."  Connectivity is not just about computerisation and the global net.  It is the phenomenon of the weather, trading systems, cultural norms and behaviour within the old and new systems. 

With the push of technological advances the interconnected nature of the world is becoming more visible and the linkages more subject to deliberate understanding and management.

 

8. Convergence

  

Convergence occurs when two non-identical systems move towards a common end point or pattern without merging or fully consolidating into one entity.

As patterns and systems converge, the critical factor for management success will be to develop a consolidated response to both the end state toward which the systems are converging and the process of convergence along the way.

 

9. Consolidation

  

There is a visible trend towards consolidation of subsystems and formerly independent entities in larger unified blocks.  This can be seen within the business system and at a corporate level as mergers and acquisitions creating ever-larger players into single units of critical mass.

When systems are consolidating, response imperatives for strategic change are twofold

a. match the size of the new and enlarged playersb. enforce deconsolidation if possible.

 

 

10.       Rationalisation

  

Over time systems will tend towards a more efficient relation of means to ends.  Force will seek pathways of least resistance.  One of the critical aspects of systems management will be to understand and redefine the end goal that drives the rational behaviour of the system and its constituent elements.  The goal or vision is the end point that gives a dynamic system its raison detre.

The process of rationalisation can be seen in learning curves and in the experience curves of prices and cost in the business world and in countless small decisions driving individual and collective behaviour towards a define d end point, either articulated or implicit.

 

 

The ten recurring patterns form a framework of risk management for the future.  They describe the need for understanding and education in the changing view of the professional risk manager.

 

Next month - trends and developments for the future.

About the Authors

Australasian Risk Management Unit

Faculty of Business and Economics

Monash University

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