Businesses are preoccupied with risks. Their managers believe they should be able to mitigate them, or at least be prepared for them. But they don’t understand the nature of complexity, and that complex events that pose risks to organizations cannot be analyzed into cause-and-effect, and cannot be accurately predicted, and therefore cannot be planned for, prevented, controlled or mitigated. The only thing a business can do is be resilient enough to cope with them if and when they occur.
Business managers likewise are preoccupied with the short term. As a result they don’t concern themselves with risks that they perceive as longer-term, or risks whose probability of occurrence they underestimate out of ignorance.
What is a business risk? Something that has a potential negative impact on the organization’s performance or sustainability (its ability to continue to operate and meet its objectives indefinitely). Risk is the product of (a) the probability or frequency of an adverse event occurring and (b) the severity of consequences (financial or otherwise) if it does occur. On the charts in this article, high risks are those in the upper right corner.
Risk management is the awareness, preparedness and mitigation actions an organization takes to minimize the consequences of organizational risks.
The charts above and below each display 30 major types of organizational risk.
So if you’re an investor, what should you make of this? My suggestion is that you do your own assessment of risks facing the companies you are thinking of investing in, and then read the Management Discussion and Analysis to see (a) whether what management is doing to address those risks is appropriate, and (b) to the extent there is little management can do, how exposed the company is to risks beyond its control.
And if you’re an activist, how can you use corporate management’s risk preoccupation to bring about social and environmental reform? This is tougher, because you need to discover what most companies don’t disclose: the social and environmentally irresponsible activities they engage in: the pollution and waste their operations produce, their propensity to use outsourcing, offshoring, union-busting and unsafe labour practices to keep costs down, the extent to which they intimidate employees and customers seeking redress for corporate misdeeds, their lobbying activities that are in the company’s interest but against the public interest, and the exploitation of foreign labour and underpriced foreign resources..
Most of these activities, while unethical, are not illegal. What’s worse, because they externalize costs (transfer them from the corporation to others) these actions contribute to the Tragedy of the Commons — and therefore exacerbate many of the external risks on these charts (global warming, energy and water shortages etc.) — risks that then affect everyone on the planet.
Because these activities are not illegal, and many of them increase short-term profits, the activist’s only recourse is to educate the public and embarrass the company into behaving more ethically. They will do this if public outrage reaches the level that the risk of damage to its reputation (one of the risks in blue on these charts) exceeds the financial rewards of unethical behaviour. Many pension funds, government investors and other private equity funds now consider corporate ethics in making investment decisions, and a combination of customer and investor loathing for a corporation’s behaviour can be a powerful market force, and a motivator to a company to clean up its act. As consumers and investors, we have more power to influence corporate activity than we might think. But it’s very difficult and expensive to get compelling, reliable evidence of corporate misdeeds, in an age when the mainstream media have largely given up on investigative reporting, and when giant corporations have deep pockets and armies of lawyers to buy off or threatenwhistleblowers, activists and investigative journalists.
But at least we can know what motivates management thinking, and therefore what we’re up against.
Other Writers About CollapseAlbert Bates (US)
Andrew Nikiforuk (CA)
Carolyn Baker (US)*
Catherine Ingram (US)
Chris Hedges (US)
Dahr Jamail (US)
David Petraitis (US)
David Wallace-Wells (US)
Dean Spillane-Walker (US)*
Derrick Jensen (US)
Doing It Ourselves (AU)
Dougald & Paul (UK)*
Gail Tverberg (US)
Guy McPherson (US)
Jan Wyllie (UK)
Janaia & Robin (US)*
Jem Bendell (US)
Jonathan Franzen (US)
Kari McGregor (AU)
Keith Farnish (UK)
NTHE Love (UK)
Paul Chefurka (CA)
Paul Heft (US)*
Post Carbon Inst. (US)
Richard Heinberg (US)
Robert Jensen (US)
Roy Scranton (US)
Sam Mitchell (US)
Sam Rose (US)*
Tim Bennett (US)
Tim Garrett (US)
Umair Haque (US)
William Rees (CA)
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My Bio, Contact Info, Signature PostsAbout the Author (2016)
--- My Best 100 Posts --
Preparing for Civilization's End:
What Would Net-Zero Emissions Look Like?
Why Economic Collapse Will Precede Climate Collapse
Being Adaptable: A Reminder List
A Culture of Fear
What Will It Take?
A Future Without Us
Dean Walker Interview (video)
The Mushroom at the End of the World
What Would It Take To Live Sustainably?
The New Political Map (Poster)
Complexity and Collapse
Save the World Reading List
What a Desolated Earth Looks Like
Giving Up on Environmentalism
The Dark & Gathering Sameness of the World
The End of Philosophy
The Boiling Frog
What to Believe Now?
Conversation & Silence
The Language of Our Eyes
Cultural Acedia: When We Can No Longer Care
Several Short Sentences About Learning
Why I Don't Want to Hear Your Story
A Harvest of Myths
The Qualities of a Great Story
The Trouble With Stories
A Model of Identity & Community
Not Ready to Do What's Needed
A Culture of Dependence
So What's Next
Ten Things to Do When You're Feeling Hopeless
No Use to the World Broken
Living in Another World
Does Language Restrict What We Can Think?
The Value of Conversation Manifesto Nobody Knows Anything
If I Only Had 37 Days
The Only Life We Know
A Long Way Down
No Noble Savages
Figments of Reality
Too Far Ahead
The Rogue Animal
How the World Really Works:
If You Wanted to Sabotage the Elections
Collective Intelligence & Complexity
Ten Things I Wish I'd Learned Earlier
The Problem With Systems
Against Hope (Video)
The Admission of Necessary Ignorance
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Learning from Indigenous Cultures
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The Job of the Media
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Nothing On Offer Here
Even Simpler and More Hopeless Than That
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We Have No Choice
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