At Polecat, we’re always trying to find new ways to visualise, conceptualise and think about risk. It’s the nature of our business and the core of what we do. So when the opportunity arose to sit down with Patrick Hollingworth, author of the book ‘The Light and Fast Organisation: A New Way of Dealing with Uncertainty,’ we took it.
Hollingworth has made a name for himself in the risk and consulting space with a list of clients that includes Marks and Spencer and Rio Tinto. Having recently reviewed his book, we were eager to get his thoughts on how he thinks businesses can reorient their approach to risk management. Here’s what he said:
1. There are many versions of ‘the truth’
We’ve said before that it’s not possible for an analyst to predict the future. Nor should they try to, says Hollingworth:
“We live in a world of disorganised complexity. It’s impossible to know everything about everything. There are so many random, interconnected variables – and because of that, many potential outcomes, realities and truths.”
“And therein lies the conundrum. We like to reduce problems and complexities down to data and simple predictions that fit our particular – often linear – view of the world, where risks have a single cause and effect. But that’s just not how the world really is.
When curveballs like Brexit come along we freak out because it undermines our ability to understand, predict and respond. But it’s fundamentally impossible to know exactly how Brexit will pan out. The only thing we can be sure of is uncertainty.
So instead of focusing on defining and predicting single outcomes or realities, we need to sift between ambiguity and uncertainty and accept that there are any number of potential outcomes associated with a risk.”
2. Managing risk means being comfortable with paradox
By extension, accepting that a risk may manifest in an infinite number of ways means being able to hold contrasting ideas and predictions, and being comfortable with paradox.
“If you accept that the world is way more complex that we can give it credit for and understand that knowledge comes in multiple forms, you need to be okay with paradox,” says Hollingworth.
“You need to be able to hold contrasting ideas at the same time, and not be frightened by it.”
3. Risk is just uncertainty that matters
“Corporate culture views risk as a bad thing,” says Hollingworth. “We only ever talk about it in the negative sense: risk management, risk control, risk mitigation and so forth.”
“But risk is just uncertainty that matters. It’s agnostic. The potential positive or negative impact of a risk has little to do with the risk itself. It’s how you react that makes a difference.”
4. Control is an illusion
Back in 2003 researchers conducted an experiment on a group of traders working in some of London’s top investment banks. The experiment involved a computer task designed to test the impact of perceptions of control on individual performance.
The findings, published by The British Psychological Society, showed that those who believed they were in control during the experiment performed relatively poorly in terms of analysis, risk management and contribution to profits. The illusion of control, they found, is maladaptive.
For Hollingworth, recognising the illusion of control is a critical first step towards better decision-making.
“You can really only control yourself,” he says. “So instead of focusing on external risks and uncertainties, shift your focus inward. Develop your skillset as a company that enables you to accept and deal with ambiguities, so that you can handle the things that are beyond your control.”
Patrick Hollingworth is the author of The Light and Fast Organisation: A New Way of Dealing with Uncertainty. Read our review here.