Every industry loves its jargon. Crisis management is no exception. I recently read an article in the Journal of Business Continuity and Emergency Planning by Dr. Jo Robertson, a highly-regarded crisis management expert and author. In the article she discusses the kind of crises that ICM has called ‘smoldering’ for years, those that are unlikely but can be devastating.
In fact, two animal names are used to define these unlikely but catastrophic events: the ‘black swan’ is a highly unlikely event that is truly unforeseen, and a ‘grey rhino,’ a smoldering issue that is highly unlikely, but knowable and often dismissed by management. The term ‘grey rhino’ is used to identify a risk that is both visible and headed your direction.
We’ve conducted numerous vulnerability assessments recently with management teams that are either very confident or very naive when it comes to crisis probability and impact. In those assessments we’ve used a common matrix that ranks risks from low impact/low likelihood to high impact/ high likelihood. With this matrix, probability and impact scores are measured thus:
Low probability (1) x High impact (5) = 5
High probability (5) x Low impact (1) = 5
Dr. Robertson argues that this model under weighs those grey rhinos, leading management teams to plan inadequately or worse, ignore them. She suggests a new model that takes a fresh approach to measuring impact so that it factors exponentially in the assessment. Robertson’s methodology reweights impact severity so that the rank increases by a factor of five at each step (1-5) on the scale. At the same time weighting for likelihood increases by quarter steps for each level (1-5) on the matrix.A reweighting with the new formula might look like this:
Low probability (1) x High impact (5) = 20
High probability (5) x Low impact (1) =1.5
This methodology provides a more realistic view of a risk so that management can better plan for and mitigate the grey rhino. It closes a gap that has left certain risks underrated and usually unaddressed. It also helps management teams look beyond the typical top five or ten risks list and use a more adaptive approach to business continuity and crisis planning. In today’s volatile world, effective risk management requires the team to build its resilience and adaptability skills and start taking a more disciplined approach to planning for the grey rhinos. This approach requires a deliberate focus on flexibility and a willingness to reconsider those low probabiity-high impact events in a new framework. ICM looks forward to implementing this new approach.
Reference: Robertson, Jo, “Planning for Grey Rhino Risks: How to prepare for the ‘unforseeable,’ Journal of Business Continuity and Emergency Planning, Vol. 17, No.4, pp.383-394, © Henry Stewart Publications. 1749-9216.
