Crises, metaphors and risk management


Metaphors often allow for a better understanding of as many risk or hazard situations as possible, as in the case of the Covid-19 pandemic. They appear in almost all areas of our existence, penetrating even research laboratories and playing a central role in the definition and organization of everyday and scientific realities. Metaphors are not an optional literary device, but rather allow us to understand and experience one thing in relation to another. They focus our attention on particular aspects of one thing that we might otherwise neglect, and in doing so, they also divert our attention from other aspects. By directing and diverting our attention, metaphors help us to construct our perception of reality in a particular way, guide our actions, and are used to present issues as problems and to assess the feasibility and relevance of various possible solutions, including policy choices. The Covid-19 pandemic is a perfect example, described as a "black swan event". However, according to Jeffrey Bohn of the Swiss Re Institute, Covid-19 is not a "black swan" event. Black Swanbut a completely different phenomenon. 

The term "black swan event" is used by some to describe the current VIDOC-19 pandemic. In an insightful book, Metaphors We Live Byauthors George Lakoff and Mark Johnson (1) write that metaphors, although initially used by people to understand circumstances and relate one scenario to another, are often in fact a driving force for action, especially in complex and uncertain environments. The metaphor itself, if taken up and used by a sufficient number of people, from individuals to businesses and governments, will guide policy. And, in the case of inaccurate or misleading metaphors, the consequences can lead to misdirected policy. 

We've probably all seen it in our personal lives. Many years ago, when I was a young parent, I believed that raising children was like working with wood like a carpenter. That means learning as much as you can, creating detailed plans, applying those plans to your children, and doing wonders with them. The "carpenter parent" metaphor is naturally appealing - the result is under your control. I quickly discovered that this metaphor led to unfulfilled expectations and resentment. My own father straightened me out, offering me a more accurate, even useful metaphor: children as garden, parent as gardener. You set the limits and allow the garden to develop as it wishes. In this way, children are more likely to find the path to their own development.

Returning to the metaphor of the "black swan" popularized by the scholar and former stock trader and risk analyst, Nassim Talebin his 2007 book (3), the author identifies three attributes to a "black swan event":
- Identified as an aberrant and unpredictable event because nothing in the past can convincingly indicate its possibility;
- Has an extreme "impact";
- Despite their anomaly status, analysts concoct explanations for events after the fact, making them explainable and predictable in hindsight.

Of course, the main implication of using the "black swan" metaphor is that business and government leaders can avoid accountability by claiming that little could have been done to prepare for this "unpredictable" event. Potentially, because the event is considered unpredictable, the risk management lessons learned from the situation are not incorporated into future management and policy decisions, making the world less resilient for all of us.

The use of the "black swan" in the case of the COVID-19 pandemic has been increasingly questioned by many people, notably in a recent article by Christian Mumenthaler, CEO of Swiss Re, on his blog.
A more accurate metaphor for the COVID-19 pandemic is that of the "grey rhinoceros", described by the policy analyst Michele Wucker in his book The Gray Rhino (2016) (4). Explanation: A "grey rhino" event is predictable and highly probable, at least probable enough, that prudent and rigorously risk-managed organizations can and should prepare for it.

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Since large (re)insurers spend a lot of time thinking about their risk portfolios, they are generally prepared for "grey rhinos". In fact, insurers that anticipate risks well (having considered pandemic scenarios before the current crisis hit) have weathered the current crises reasonably well. Unfortunately, many organizations are not prepared for "grey rhino" events such as pandemics, as the risk event does not occur every year. Given the widespread lack of preparedness on the part of some companies and governments, it appears that the risk of a pandemic has been largely ignored by policy makers, even though epidemiologists and many policy makers have predicted its occurrence based on a range of observable factors. Thus, we should not call this pandemic a "black swan".

For years, many public figures have sounded the alarm about the risk of a pandemic, including Bill Gates. Some governments and businesses have prepared for the risk of a pandemic by using scenario analysis. Perfect-StormAnother useful metaphor is that this type of analysis reflects a convolution of multiple systems and processes to generate possible outcomes that can be predicted as sufficiently probable to warrant preparation - even if the event has never been seen before. While "grey rhinos" are obvious high-risk events, scenario analysis of Perfect-Storm may reveal less obvious results of predictable interactions.

This is where creative and insightful scenario analysis and simulations show their value. Scenarios Perfect-Storm that have not been tested should be included in scenario or simulation exercises in light of visible and foreseeable trends. These scenario analyses contribute to risk management thinking and consideration and should then lead to better anticipation and improvements in the calculation of risk management.

The COVID-19 pandemic is an event " Gray Rhino "whose consequences could have been predicted with a scenario analysis of Perfect-Storm well specified. If we persist in calling this pandemic a "black swan", it makes it easy for decision-makers to avoid accountability. 

Jeffrey R. Bohn, Director of Research and Innovation at the Swiss Re Institute (SRI)

(1) George Lakoff, and Mark Johnson, Metaphors We Live By, Unversity of Chicago Press Chicago, 1980
(2) Elisabeth Paté-Cornell, Uncertainties in risk analysis: Six levels of treatment Reliability Engineering and System Safety 54 (1996) 95-111, Elsevier Science Limited, 1996
(3) Nassim Taleb, The Black Swan: The Impact of the Highly ImprobablePenguin Random House: New York, 2007.
(4) Michele Wucker, The Gray Rhino: How to Recognize and Act on the Obvious Dangers We IgnoreSt. Martin's Press: New York, 2016.

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As a consultant specialized in risk management of international industrial projects and a lecturer in MBA and E-MBA programs in French and foreign Business Schools, I fully agree that Covid-19 cannot be qualified as a black swan. Too many past indicators (risk triggers) were known since the early 2000s with SARS, Ebola. Worse, Bill Gates had held a premonitory conference with excellent suggestions for prevention. The only case of black swan which, in my opinion, could be (partially) recognized as such would be the Fukushima disaster, whose… Read more "

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