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Risk taxonomy: Difference between revisions
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{{a|risk| | {{a|risk| | ||
[[File:Taxonomy.jpg|450px|frameless|center]] | [[File:Taxonomy.jpg|450px|frameless|center]] | ||
}}A fine occupation for the idle | }}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 assess a risk without knowing 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? | ||
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====It’s a [[narrative]]==== | ====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,<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> | 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]]. | 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'''. | |||
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. | 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]] | 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]] | ||