• Foreign Policy & Risk Management

      12 comments
      21st Dec 09
      Tom
    Natanz Nuclear Facility
    Image by Hamed Saber via Flickr

    I regularly read Stratfor’s Geopolitical Weekly. It’s a fascinating glimpse into the world of foreign policy risk management. Take this week’s issue for example. George Friedman analyzes the stalemate between the U.S. and Iran over Iran’s nuclear ambitions.

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    In the article, George writes about an Iranian incursion into Iraqi territory (which I hadn’t even heard about) and how it relates to Iran’s strategy for dealing with the U.S. demand to abandon its nuclear program. He provides a detailed analysis of the situation, the risks to each country, the possible consequences and the potential options for how each country might respond to those risks. Does the process sound familiar? It should. It’s the risk management process we’ve been talking about – identify risks, evaluate risks and plan for risks.

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    Every time I read one of Stratfor’s articles, I can’t help but wonder how many analysts are working for the U.S. government on these types of analyses. I’m sure the number would scare me. And then I think about how many analysts are working for the other major countries of the world. No doubt it is a very large number indeed – a good thing in my opinion. I shudder at the thought of politicians making world-changing decisions based on gut-feel.

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    Risk management plays a critical role in global life and the interactions between countries. It should play a critical role in your business life and the interactions with your stakeholders (customers, employees, financiers, et al.). The process is exactly the same, only the sophistication of the evaluation techniques differ. The decisions the world’s politicians make could change the world for all of us. The decisions you make in your business are world-changing for you and your stakeholders (granted, a smaller scale, but pretty damn important to your stakeholders, don’t you think?). Shouldn’t those decisions get the benefit of the same risk management process?

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    Do you see the parallel? Do you agree or disagree? I dare you to share your opinion….

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    p.s. I promise to get back to the how-to’s of the risk management process – how to plan for your risks – next week.

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    • Keith Baxter

      December 22nd, 2009 at 08:46

      Couldn’t agree more. All governments (should) have a strategy. That strategy is based on a set of assumptions. The risk to those assumptions, when assessed by all key stakeholders, should gives an objective (certainly rigorous) picture of the strategic risks faced. Prioritised appropriately, the action plans should be clear.

      I think the problem is that the real risks get burried in politics and a formal risk management process makes that more difficult at least!

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    • Tom

      December 22nd, 2009 at 09:00

      Thanks for the comment, Keith. Maybe the “risks getting buried in the politics” is a primary reason for the seemingly perpetual conflict between the military/intelligence services and the legislators – at least in the U.S. Does the same conflict exist in the UK?

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    • professor pinch

      December 23rd, 2009 at 21:15

      You beat me to one of my next posts! Stratfor is a great resource.

      And yes, you’re spot on. I like to think in the context of scenario generation (or scen gen), looking at not just the immediate effect, but potential knock-ons and secondary impacts. You string those events together and you have a scenario. It may be a low-probability event, but those usually have a very high severity.

      The knock-on effects worry me more than the immediate impact of event-driven risks. Because an event is usually itself a symptom of some underlying issue that went unattended/unaddressed.

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    • Matt Sims

      December 24th, 2009 at 01:11

      See the parallel Tom, and completely agree.

      The challenge is getting the cowboys of the business world (shoot first, ask questions later) to recognize that decisions are not events, but in fact processes that can be managed and improved like any other in the business.

      It’s changing behaviours, and that is always challenging.

      Thanks for the dare Tom, look forward to reading more of your posts.

      Matt

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    • Tom

      December 24th, 2009 at 07:02

      Great point, Professor. I have never run across a business exec who consciously tries to manage anything more than event-driven risks. Another symptom of our short-term goal driven business world, perhaps. The thought of doing scenario generation is somewhat overwhelming, but in reality it’s just a sequence of risk events, isn’t it? I know I need to do a better job on this aspect myself. Thanks.

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    • Tom

      December 24th, 2009 at 07:09

      I agree with you, Matt. Any decision is a process – from choosing a meal at a fast food restaurant drive-through to creating strategy. I think most business types may get hung up on the mis-perception that process means slow, formal and onerous. I’m not a big fan of the word ‘paradigm’, but I think you’ve hit on one of the big ones out there… Thanks for taking me up on the dare!

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