Managing risk and nurturing resilience are like night and day. They each aim at a similar destination. But they take very different roads to get there. Along the Gulf of Mexico we are driving mostly at night along a very narrow road at the top of a steep cliff.
According to the Financial Times, Tony Hayward, British Petroleum’s CEO, said the company is “looking for new ways to manage ‘low-probability, high-impact’ risks such as the Deepwater Horizon oil rig accident.”
But in the Washington Post, Richard Posner explains, “There is a natural tendency to postpone preventive actions against dangers that are likely to occur at some uncertain point in the future (‘sufficient unto the day is the evil thereof,’ as the Bible says), especially if prevention is expensive, and especially because there is so much else to do in the here and now… It seems that no one has much incentive to adopt or even call for safeguards against low-probability, but potentially catastrophic disasters.”
Faced with an actual and still growing disaster, for the moment Mr. Hayward and the rest of us have plenty of incentive to consider low-likelihood, high-consequence possibilities. This is, as a first grade teacher might say, a teachable moment. In an early June Wall Street Journal op-ed, British Petroleum’s CEO listed three lessons-learned so far:
- “First, we need better safety technology…”
- “Second, we need to be better prepared for a subsea disaster. It is clear that our industry should be better prepared to address deep sea accidents of this type and magnitude…”
- “Third, the industry should carefully evaluate its business model…” This is corporate-speak for cutting out sub-contractors and tightening command-and-control. In related comments reported by The Financial Times, “Mr. Hayward argued that the industry could cut the risk of serious accidents in deep-water drilling to ‘one in a billion or one in a trillion’, but it might mean changing the way the drilling industry works.”
These are entirely reasonable risk-management responses: enhanced prevention technology, improved response capacity, and tightening the relationship between responsibility and accountability. Such risk reduction is helpful. But in claiming to reduce risk to a one-in-a-billion or one-in-a-trillion chance (quite a range), Mr. Hayward demonstrates he still has some learning to do.
Drilling for oil anywhere involves risk, even more a mile under the ocean. The risk is amplified by an operating environment that is especially sensitive to the risk. It is also an operating environment that complicates risk containment.
One more lesson: Risk Persists. We can try to transfer, avoid, and reduce risk, but risk does not disappear. The more we try to convince ourselves the risk has been managed away, the more we are probably putting ourselves at risk. The best attribute of an effective risk manager is a persistent bit of professional (not personal) paranoia.
Which points toward another lesson: because our ability to manage risk is innately limited, the resilience of our environment, our resources, and our purposes are especially important. Resilience is not a risk-management strategy. Resilience is much more fundamental.
Derek Armitage developed the resilience definition I use, “(1) the ability of a system to absorb or buffer disturbances and still maintain its core attributes; (2) the ability of the system to self-organize, and (3) the capacity for learning and adaptation in the context of change.” According to the evidence so far, the Deepwater Horizon drilling platform will be a great case-study of a non-resilient system.
Armitage also reminds us, “Systems experience changes that are unknowable and discontinuous, and involve sudden and dramatic flips.” This insight into how complex systems operate is not yet common sense. In fact, it remains uncommon among many – arguably most – managers, engineers, and others who are deeply invested in systems continuity. Since April 20 British Petroleum, TransOcean, and all of us have had the opportunity to learn quite a bit more about complex adaptive systems. Have we learned?
Last week Mr. Hayward explained in his WSJ op-ed, “The industry and the government did not anticipate this type of accident—one in which all the ‘failsafe’ mechanisms failed.” This is a valuable observation. But there is no evidence – yet – that Mr. Hayward or many in government, media, or the general public have learned that inability to predict is innate to catastrophic potential. A catastrophe is the outcome of an unpredictable cascading failure of inter-related systems.
During his June 4 press briefing Admiral Thad Allen, the national incident commander, said, “One of the things we may want to look at in the future – when we look for a worst-case scenario – (is how) we look at a discharge and the equipment needed to deal with that particular discharge. I don’t think any response plan ever contemplated response over this long period of time moving into a hurricane season.” Thinking through how to deal with worst-case scenarios is helpful. But complex systems will sooner or later present a worst-case we did not predict. It is important to manage risk, but risk persists.
Given the reality of persistent risk, we should nourish a resilience that goes beyond any set of specific risks. Resilience is an expression of how the various elements of a system are in relationship with one another. Over the last twenty years Elinor Ostrom, the 2009 Nobel Prize laureate in economics, has identified the principal attributes of resilience in human communities, including:
- Broad based participation, collaboration, and deliberation: Our risk management discussion is now focused on how to enhance command-and-control through new business models and better regulation. (see June 6 New York Times) But if this is our only strategy it will discourage meaningful community-based and regional risk assessment, under-value public-private partnerships in preparedness, and fail to cultivate a shared vision of how risk-taking and resilience-making can contribute to the common good. Command-and-control has a narrow benefit. Collaborating-and-creating has broad benefit, but it does not come cheap.
- Multilayered and polycentric organizational structures: In the aftermath of the disaster, the risk management discussion is now focused on how to narrow and focus operations. Tactically this makes sense. But such narrowing will reduce strategic resilience unless our approach also allows for cross-cutting federal, state, local, and private-sector involvement in deciding how risk is undertaken. What is most efficient is not always most effective, especially in the most consequential risk-taking.
- Networked organizational structures with mutual accountability built into how the network functions: The authentic acceptance of mutual accountability is crucial. A couple of weeks ago the Obama administration was experimenting with the notion of “collective responsibility.” While roughly coherent with mutual accountability, the public was not receptive. The concept cannot be imposed after-the-fact. Mutual accountability is cultivated over time through the other components of resilience-making.
- Content-rich and meaningful interaction regularly occurring across the network: One of the reasons that command-and-control or broadcast strategies (such as the current BP advertising campaign) have limited pay-offs is the lack of interaction. The more interaction, the more potential collaboration, the more likely an acceptance of mutual accountability. But making this investment in advance is non-trivial.
- Facilitative and/or catalytic leadership (in sharp contrast with authoritative or control-oriented leadership): Thad Allen has, sometimes under considerable pressure, been the most authoritative and the most facilitative leader involved in the Deepwater Horizon response. His uniform and demeanor contribute to the sense of authority. But the admiral’s rhetoric and approach has been facilitative, even to point of continuing to treat BP as a “partner” long after public opinion has demonized the company.
- All the preceding attributes and their activities produce knowledge of both the system and its environment: Making resilience is the outcome of many parts. Through all the preceding steps a web of relationships is established. This web is much more likely to survive in some form, no matter how hard it is hit. If elements of the web are taken out, what persists retains the knowledge – intention and potential – of the entire web.
- All the preceding attributes contribute to individual and system-wide learning, which is the application of knowledge to maintaining and/or potentially extending the boundaries within which the system maintains its equilibrium: A resilient web of relationships continues to learn and grow even – sometimes especially – under stress. We are motivated to learn by our relationships across the web and our mutual accountability. For the same reasons we are also motivated to apply what we have learned, which is key to maintaining, restoring, or extending the systems equilibrium.
- The sum of the preceding attributes creates a sense of mutual trust between most of the participants in the system. Today there is very little trust in evidence along the Gulf (see BP makes progress on spill, less on trust). This reflects the narrow, “business-like” relationship of the industry to the Gulf region before the disaster. The lack of trust also reflects a nearly exclusive federal role in regulating the industry before the disaster. Unfamiliarity does not nurture trust. Trust is built through ongoing substantive interaction over time. The disaster unfolding in the gulf would challenge the most robust circle-of-trust, but there had been no sustained effort prior to the disaster to form the circle.
The teachable moment is upon us, but I perceive the resilience lesson is yet to be learned. The lessons are, in many ways, coming too late for British Petroleum and others involved in the Gulf disaster. What about the rest of us?
Risk management and resilience complement each other, but are largely parallel paths. Risk management is focused on defining the down-side and controlling it. Resilience imagines the upside and tries to create it.