Risk But, Wasnt That a Disaster - Essay Example

Risk? But, Wasn’t That a Disaster? Tragedies often take place and as a consequence, precious lives are lost. Every disaster is usually followed by an inquiry. These investigations are usually quite detailed for physical catastrophes; however, for major corporate or financial failures examinations are not as comprehensive as the gravity of matter demands. This paper reviews the analysis of works of Toft and Reynolds, two very learned risk management analysts. They have also within this article discussed an intelligent approach towards risk estimation and management. Turner, from his research work and later published book “Man Made Disasters”, establishes that clear patterns can be drawn out of every disaster that takes place due to human negligence (Turner, 1978). These patterns according to him are clearly divisible in six steps. He also argues that humans can do much more than just witness a catastrophe. Similarly, Perrow in his published book “Normal Accidents” mentions that due to the fact that people are incompetent when it comes to ‘handling complexity’ (Perrow, 1984) therefore accidents at composite facilities come by easily. Both, Turner and Perrow’s work is highly regarded, which were only possible due to society’s resolve to find a way to avoid accidents. Turner also points out in his above referred works that usually it is the un-tested innovation that causes the disaster. He refers to accidents at Hixon in 1968 and Summerland in 1973. Moving from physical disasters to corporate ones, the writer talks about the opportunity for isomorphic learning where in firms specialize into a special segment and engineer the best possible way of doing that job. This way significant time is saved as organizations can out source a particular activity and don’t have to spend time to learn it to do the right way. Not only this complex processes can be better performed by the task masters. Errors in these processes are usually human, and therefore learning to deal with infrequent events is what isomorphic learning is all about. Analyzing these disasters one realizes how similar they are at the time of happening. Human errors are seen to be a major player as far as financial disasters is concerned. Therefore, according to the writer there is a severe need to learn from these mistakes, so that such incidents can be avoided. Although the work that the writer of the article has cited from the authors is pretty much credible, however, more supportive work would make the argument stronger. Incorporating research and studies gives a lot of weight to the examination. Disasters, according to Turner, are caused due to various reasons. His thorough analysis characterizes them as follows: 1. When small and large organizations work together on a project. As both use different systems there is always a higher chance that lapses in system can take place. 2. Tasks that are not properly elaborated and seemingly look easier than they really are. 3. revising goals frequently and not communicating them in time, and changing practices 4. out of date regulations 5. employees occupied with their routine work are usually not able to take time out to supervise different out sourced activities Turner and Pidgeon emphasize that complexity of problems compounds as the number of information handlers’ increase as many new views generate as well as variation in information. This is an inherent problem in today’s organizations. Perrow analyzes the problem of Three Mile Island differently. He establishes three important indices which usually form the ground of large scale financial accidents. The first one he refers as ‘familiarity’ is the over-confidence we have and we usually assume that everyone knows as much as we know. Dorner, believes that due to this over-confidence, we do not re-evaluate things in our mind and that incomplete information always is misleading. John Adams categorizes risk into three main categories. Ones that can be assessed base on our personal experiences. Second are the ones that have to be judged on basis of mathematical models and the last are that have to be judged without credible information in conditions of uncertainty. Perrow and later Checkland believe that complexity mainly depends on the size of the organization and while different organizations interact the levels of complexity differs and some of the checks are not there in the lesser complex organizations. Also complexity is dependent on human frailty, and this increases the level of difficulty of a problem. An important method for keeping a check is risk intelligence. Usually, to avoid extra cost budget cuts often target audit costs, which directly affects the monitoring of the financial system. To maintain this monitoring system internal control needs to be made stronger so that surprises can be avoided to the maximum. As far as tight coupling is concerned, organizations in order to conserve important resources both time and money, tries to skim through process, at times bypassing important steps. These in times of crises act as important pointers highlighting the problems. These vital checks should be used if they are in place. If used these can give ample opportunity to analyze and give time for effective reaction. Perrow also points out towards a new culture that is being introduced now, where in instead of tight coupling, we see what is called loose coupling. In such a case, an employee is trained to supervise a particular task but not controlled via culture. This results not only in remote checks but also increases employee’s motivation level. This is effective in a situation where there are complex systems in an organization and detailed paperwork can be costly. Both Perrow and Turner mention that problems don’t emerge all of a sudden. They take their time called incubation time. Checks should be put so that decisions can be taken in time and contingency plans be made. Turner and Perrow both significantly emphasize as trap of false belief. They say people and organization tend to believe things are going right until and unless something badly goes wrong. This also results in more of a surprise towards an incident. They imply that the signs are there all the time but are usually misread. This requires according to him a safety culture where information is checked for correctness, reliability and validity. He finally puts that a good risk management system should be loose coupled. This has to be incorporated into the organizations culture and has to trickle down from the top management. Risk intelligence as the writer puts it is in fact a combination of the factors put forward by Turner and Perrow. They constitute complexity, familiarity, and coupling issues. The work of Turner, Perrow and others recognizes that information gathered should be reliable and valid. Gauging complexity is a personal trait. However, loose coupling needs de-centralized system within the organization. Subsequently, system checks have to be on guard and should not be by passed even in the easiest of situations, let go of the difficult ones. People should realize that others might not have the same information as they have and therefore should always discuss the issue in detail. As far as business is concerned analysis and review should form an important part of the decision-making process. Internal audit and Quality assurance procedures should be adopted and religiously followed. Risk intelligence is more of a proactive approach, i.e., to highlight a problem way before it becomes a disaster. Over-confidence kills and a tradition of self check should be developed into the organizational culture to manage complexity. Questions like “what if” should be more frequent in an organization which is bound to work in a tight coupling mode. Lastly, information should always be cross-validated. There have been a few limitations with the writer, as they usually are and he has mainly taken into consideration the work of Perrow and Turner. There have been a few cultural analyses by Mary Douglas and Karl Dake which can be a part but not direct examples of isomorphic learning. Both Perrow and Turner’s emphasis proves that the points mentioned earlier are significant as they both conducted separate studies. Humans according to the author are inclined to make things better in any given situation. However, lack of information results in wrong decision and thereby insignificant problems turning into major disasters. Finally, as put earlier risk intelligence has more to it than just these few factors as the human dynamics are as wide as are the horizons. The article by Keith has been a comprehensive analysis of both Perrow and Turner’s work and clearly specifying the areas that need to be addressed. It’s a constructive article and fit for publishing. Read More