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{{a|risk|}}A fine occupation for the idle [[Mediocre lawyer|lawyer]]: Describing, and grouping in relation to each other, the entire catalog of risks that face your undertaking, as if unrealised legal hazards can be ranked, boxed and sorted like the phyla of butterflies, tits or thrush.  
{{a|risk|
[[File:Taxonomy.jpg|450px|frameless|center]]
}}A fine occupation for the idle risk manager: describing, and grouping in relation to each other, the entire catalog of risks that face your undertaking, as if unrealised hazards can be ranked, boxed and sorted like the phyla of butterflies, tits or thrush.  


This exercise can occupy as little — a breakout session on an away-day — or as much — the permanent task of a dedicated division in the department — of your firm's intellectual capacity as you have going spare: organisations that run to the bureaucratic<ref>''You'' know who you are.</ref> may become so swooned by this notion that they can find little time to do anything else. For how can one asses the risks of a transaction if one doesn't know from which family of what genus in what species it hails?
This exercise can occupy as little — a breakout session on an away-day — or as much — the permanent task of a dedicated division in the department — of your firm's intellectual capacity as you have going spare: organisations that run to the bureaucratic<ref>''You'' know who you are.</ref> may become so swooned by this notion that they can find little time to do anything else. For how can one assess a risk without knowing from which family of what genus in what species it hails?


===The problem with risk taxonomies===
===The problem with risk taxonomies===
{{JC}} has ''two'' reservations about risk taxonomies:
{{JC}} has ''two'' reservations about risk taxonomies:
====The [[Known known|false comfort blanket]]====
====The [[Known known|false comfort blanket]]====
Any [[taxonomy]], like a map, can only document the territory you ''know'', have raked over, surveyed and measured. ''Stables from which the horse has bolted'', so to say. This is of a piece with the [[Mediocre lawyer|common lawyer]]’s usual mode of reasoning, the [[doctrine of precedent]], whose organising principle is to move ''forward'' by exclusive reference to what lies ''behind''. This is all very well in times of plenty, when the tide is rising, all boats are floating, those swimming nude are safely concealed from the neck down and all is well in the world. Here, the world behaves according to the narrative we have supplied it — we are in a period of “[[normal science]]”<ref>{{Author|Thomas Kuhn}}, {{br|The Structure of Scientific Revolutions}}. If you take ''one'' book recommendation from the {{tag|JC}}, make it this one. Or {{br|The Origins of Consciousness in the Breakdown of the Bicameral Mind}}.</ref>. But by the same token, the acute risks are in abeyance. Aslan is ''not'' on the move. Even if you left the door open, the horse has a nosebag full of hay and is’t going anywhere.
Any [[taxonomy]], like a map, can only document the territory ''you already know'', have raked over, surveyed and measured it. [[Known known]]s. ''Stables from which the horse has bolted'', so to say.  
 
This is of a piece with the [[Mediocre lawyer|common lawyer]]’s usual mode of reasoning, the [[doctrine of precedent]], whose organising principle is to move ''forward'' by exclusive reference to what lies ''behind''. This is all very well in times of plenty, when the tide is rising, all boats are floating, those swimming nude are safely concealed from the neck down and all is well in the world. Here, the world behaves according to the narrative we have supplied it — we are in a period of “[[normal science]]”<ref>{{Author|Thomas Kuhn}}, {{br|The Structure of Scientific Revolutions}}. If you take ''one'' book recommendation from the {{tag|JC}}, make it this one. Or {{br|The Origins of Consciousness in the Breakdown of the Bicameral Mind}}.</ref>. But by the same token, the acute risks are in abeyance. Aslan is ''not'' on the move. Even if you left the stable door open, Dobbin has a nosebag full of hay and isn’t going anywhere.


But what happens when our carefully constructed narrative falls apart? Those stressed scenarios in which, as the old saw has it, {{maxim|I’ll be gone, you’ll be gone}}, and [[black swan]]s will be angrily flapping about. Then, your [[paradigm]] has failed. People around you are losing their heads and blaming it on you and your stupid [[taxonomy]], ''which suddenly isn’t working''.  
But what happens when our carefully constructed narrative falls apart? Those stressed scenarios in which, as the old saw has it, {{maxim|I’ll be gone, you’ll be gone}}, and [[black swan]]s will be angrily flapping about. Then, your [[paradigm]] has failed. People around you are losing their heads and blaming it on you and your stupid [[taxonomy]], ''which suddenly isn’t working''.  
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====It’s a [[narrative]]====
====It’s a [[narrative]]====
Any [[taxonomy]] is a [[narrative]]. Like any hierarchical organising system, a taxonomy commits you to one way of looking at the world, ''at the expense of all others''. Now this a necessary evil when it comes to concrete physical things, like books: the [[Dewey decimal system]] is a single hierarchy by necessity: a physical thing cannot be in two places at once. So all library users agree a common taxonomy (subject matter, not author, or title, or publisher) and, for better or worse, stick to it. This has a consequent effect on how everyone thinks about the world: if you want to find the book you're looking for, you need to buy in to the taxonomy (what good is using another taxonomy, however suitable, if it means never being able to find the book you are after? Since book storage has changed, the Dewey decimal system has more or less disappeared from use. Boolean search means you can search on any keyword you fancy.
Like any hierarchical organising system, a [[taxonomy]] is a ''[[narrative]]''. It commits you to ''one'' way of looking at the world, ''at the expense of all others''.  
 
Now this a necessary evil when it comes to concrete, physical things, like books. A librarian must settle on a single taxonomy and, for better or worse, stick to it, even though there are theoretically unlimited other ways of organising the collection. The [[Dewey decimal system]] is such a single hierarchy. It does not “carve nature at its joints” but draws arbitrary boundaries between fields of learning,<ref>General reference, Philosophy, Religion, Social Sciences, Language, Natural Science, Applied Science, Arts & Recreation, Literature and History.</ref> which can lead to odd discontinuities<ref>“Logic” is part of Philosophy, whereas “mathematics” is part of Natural Science, for example — notwithstanding that mathematics is not a science at all, but a language.</ref> but it does provide a framework, and is clearly better than nothing: the same book can’t be in two places at once, and you have to put it ''somewhere''. Over time, the worldwide community of physical librarians came to the settled consensus that [[Dewey decimal system|Dewey]]’s system was as good a way as any to organise books, and so, by dint of that convergence, it was — the predictability between libraries that it gave outweighed any weaknesses or logical discontinuities in Dewey’s schema.
 
But ''legal'' risks ''aren’t like books''. They aren’t physical things. They aren’t concrete. They are ''un''concrete. They’re amorphous, will-o’-the-wisp, [[black swan]]s: they [[emergent|emerge]], coagulating in mid air like suffocating ectoplasms, from ''nowhere''. They are obstreperous phantoms, silently incubating in harmless, dusty corners so [[tedious|dreary]] we can scarcely bring ourselves to even pay them attention until, to our horror, we see it is too late.<ref>Like the BBA’s process for setting the sleepy old [[London Inter Bank Offered Rate]]. Anyone [https://www.google.com/search?&q=libor+%22mundane%22+%22boring%22 remember that old yawnfest]?</ref>
 
In the last twenty years the global finance industry has faced some proper, existential threats. It has [[Jenseits von Gut und Böse|looked long into the abyss]]. [[LTCM]]. [[LIBOR]]. [[Madoff]]. [[Dotcom]]. [[Lehman]]. None of these epochal shit-shows registered more than a faint pulse in the frame of consciousness of the most paranoid [[risk controller]] ''until they happened''.
 
''Nor will the next one''.
 
Risks materialise ''when'' everyone is looking in another, wrong, direction. '''Risks materialise ''because'' everyone is looking in another, wrong direction'''.  


{{dewey decimal system}}
So why will everyone be looking in another, wrong direction? ''BECAUSE THEIR RISK TAXONOMY IS TELLING THEM TO.'' Their risk taxonomy, in other words, ''is'' that other, wrong direction.


A Boolean methodology does not require any such juxtaposition. It is open-ended and infinite, and agnostic to rules where in the same way that a full-blown taxonomy is closed-ended and finite.
In this way, the [[risk taxonomy]], itself, ''is'' the risk. New risks will, ''by definition'', inhibit the seams, cracks and weak joints of your present [[narrative]] — they will prompt you, ''after'' the fact, to change your [[narrative]]. They will prompt you to build a new stable around the space where the horse ''you didn’t even know was there'' turns out to have been standing, before it bolted.  


{{seealso}}
What to do? Sagely, the [[general counsel]] will mandate action to defend against this newly identified risk. “We must”, {{sex|she}} will solemnly say, revisit our [[service catalog]]. We shall have a new [[steering committee]]. And an [[operating committee]] to implement it. And with that unimpeachably sound governance, ''we shall build a new, stronger, better, [[risk taxonomy]]''.
{{sa}}
*[[Black swan]]
*[[Black swan]]
*[[Doctrine of precedent]]
*[[Doctrine of precedent]]
*[[Steering committee]]s and [[operating committee]]s
*[[Jenseits von Gut und Böse]]
*{{risk|Rumsfeld’s taxonomy}}
*{{risk|Rumsfeld’s taxonomy}}
{{ref}}
{{ref}}

Latest revision as of 08:55, 25 June 2021

Risk Anatomy™
Taxonomy.jpg


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A fine occupation for the idle risk manager: describing, and grouping in relation to each other, the entire catalog of risks that face your undertaking, as if unrealised hazards can be ranked, boxed and sorted like the phyla of butterflies, tits or thrush.

This exercise can occupy as little — a breakout session on an away-day — or as much — the permanent task of a dedicated division in the department — of your firm's intellectual capacity as you have going spare: organisations that run to the bureaucratic[1] may become so swooned by this notion that they can find little time to do anything else. For how can one assess a risk without knowing from which family of what genus in what species it hails?

The problem with risk taxonomies

Jolly Contrarian has two reservations about risk taxonomies:

The false comfort blanket

Any taxonomy, like a map, can only document the territory you already know, have raked over, surveyed and measured it. Known knowns. Stables from which the horse has bolted, so to say.

This is of a piece with the common lawyer’s usual mode of reasoning, the doctrine of precedent, whose organising principle is to move forward by exclusive reference to what lies behind. This is all very well in times of plenty, when the tide is rising, all boats are floating, those swimming nude are safely concealed from the neck down and all is well in the world. Here, the world behaves according to the narrative we have supplied it — we are in a period of “normal science[2]. But by the same token, the acute risks are in abeyance. Aslan is not on the move. Even if you left the stable door open, Dobbin has a nosebag full of hay and isn’t going anywhere.

But what happens when our carefully constructed narrative falls apart? Those stressed scenarios in which, as the old saw has it, I’ll be gone, you’ll be gone, and black swans will be angrily flapping about. Then, your paradigm has failed. People around you are losing their heads and blaming it on you and your stupid taxonomy, which suddenly isn’t working.

See also: known knowns

It’s a narrative

Like any hierarchical organising system, a taxonomy is a narrative. It commits you to one way of looking at the world, at the expense of all others.

Now this a necessary evil when it comes to concrete, physical things, like books. A librarian must settle on a single taxonomy and, for better or worse, stick to it, even though there are theoretically unlimited other ways of organising the collection. The Dewey decimal system is such a single hierarchy. It does not “carve nature at its joints” but draws arbitrary boundaries between fields of learning,[3] which can lead to odd discontinuities[4] but it does provide a framework, and is clearly better than nothing: the same book can’t be in two places at once, and you have to put it somewhere. Over time, the worldwide community of physical librarians came to the settled consensus that Dewey’s system was as good a way as any to organise books, and so, by dint of that convergence, it was — the predictability between libraries that it gave outweighed any weaknesses or logical discontinuities in Dewey’s schema.

But legal risks aren’t like books. They aren’t physical things. They aren’t concrete. They are unconcrete. They’re amorphous, will-o’-the-wisp, black swans: they emerge, coagulating in mid air like suffocating ectoplasms, from nowhere. They are obstreperous phantoms, silently incubating in harmless, dusty corners so dreary we can scarcely bring ourselves to even pay them attention until, to our horror, we see it is too late.[5]

In the last twenty years the global finance industry has faced some proper, existential threats. It has looked long into the abyss. LTCM. LIBOR. Madoff. Dotcom. Lehman. None of these epochal shit-shows registered more than a faint pulse in the frame of consciousness of the most paranoid risk controller until they happened.

Nor will the next one.

Risks materialise when everyone is looking in another, wrong, direction. Risks materialise because everyone is looking in another, wrong direction.

So why will everyone be looking in another, wrong direction? BECAUSE THEIR RISK TAXONOMY IS TELLING THEM TO. Their risk taxonomy, in other words, is that other, wrong direction.

In this way, the risk taxonomy, itself, is the risk. New risks will, by definition, inhibit the seams, cracks and weak joints of your present narrative — they will prompt you, after the fact, to change your narrative. They will prompt you to build a new stable around the space where the horse you didn’t even know was there turns out to have been standing, before it bolted.

What to do? Sagely, the general counsel will mandate action to defend against this newly identified risk. “We must”, she will solemnly say, revisit our service catalog. We shall have a new steering committee. And an operating committee to implement it. And with that unimpeachably sound governance, we shall build a new, stronger, better, risk taxonomy.

See also

References

  1. You know who you are.
  2. Thomas Kuhn, The Structure of Scientific Revolutions. If you take one book recommendation from the JC, make it this one. Or The Origins of Consciousness in the Breakdown of the Bicameral Mind.
  3. General reference, Philosophy, Religion, Social Sciences, Language, Natural Science, Applied Science, Arts & Recreation, Literature and History.
  4. “Logic” is part of Philosophy, whereas “mathematics” is part of Natural Science, for example — notwithstanding that mathematics is not a science at all, but a language.
  5. Like the BBA’s process for setting the sleepy old London Inter Bank Offered Rate. Anyone remember that old yawnfest?