A commercial approach to managing civil and national security risks
In 2007 Nassim Nicholas Taleb published his now famous book, The Black Swan in which the notion of risk was expanded beyond financial markets into seemingly unpredictable and devastating events that carry extreme impact, despite being explicable after the event. He called these events Black Swans. Recent examples include UK urban unrest (2011), volcanic ash cloud (2010) and the Fukushima power plant disaster (2011).
Black Swans have now entered into the common parlance of big business with risk managers busily deploying strategies to better predict and deal with their fall-out. Boards of Directors of large enterprises realise that the risks to their business can never be fully quantified, and that with this knowledge they gain a competitive advantage by being better prepared than their competitors to deal with crises.
As business begins to acknowledge the necessity of understanding Black Swan events and incorporating them (as best they can) into their business models, the UK Government has started to lag in its thinking around Black Swan risk.
Managing its civil and national security risk is one of the greater challenges facing any government. Since, 2010 the UK government has made great strides to firm up the way it predicts and manages these risks. On the other hand, there is a great deal more it can be doing. As a starting point for this process of reform I have recommended the following five policy recommendations:
- Setting up of a new Office for Risk Management
- Bringing in external advice to reducing group-think within the government’s processes
- Encouraging a common risk culture across government
- Introducing best practice risk management structures from business, including the ‘three lines of defence’ approach
- Introducing quantitative risk modeling strategies to both the Office for Risk Management and government departments.
It is essential that the government acts to reform its risk management framework. The policy proposals put forward in this paper and summarised above are a pragmatic and cost effective way of achieving meaningful results for the country. The government should act swiftly, as what is at stake is nothing short of the life of the nation and the security of its citizens.