Black Swans and Business Continuity Consultants

“Black Swan”, following the theory of the same name proposed by Nassim Nicholas Taleb, is the epithet now applied to a number of catastrophes and business continuity challenges. The underlying idea is simple enough. Certain high-impact events are hard to predict and have relatively little chance of occurring; however, when they do occur, they can change the course of history. For centuries, the black swan as a bird was thought not to exist. It turned out that such a bird did exist, which was a considerable surprise to “old world” observers. Part of the role of business continuity consultants is to help organisations understand that “black swans” exist and can affect them.

Even if many “black swan” events are explainable after the fact, this doesn’t stop them from being unexpected and unpredictable before the fact. They can hit individual companies just as much as whole communities, although their effect can be positive as well as negative. The arrival of Internet was positive for many companies. As a counter-example, the Levi Strauss company saw its income collapse in Q2 of 2008 by 98% (it made just $1 million net), compared to Q2 of 2007. The cause was an ambitious re-design of the ERP system and a surprise requirement at the same time to integrate into mega-retailer Wal-Mart’s systems.

Taleb’s suggestions for tackling the problem include building in robustness against catastrophes and readiness to exploit opportunities. While this sounds like basic business continuity consultants advice, he warns against trying to predict the future simply by analysing the past. He also points out that to really understand risks, it is unwise to use “normal” models and simulations, because the “usual” doesn’t allow consideration of the exceptional events that can really make or break business continuity. Such a blinkered approach needs to be augmented by methods that allow businesses to apprehend the large-scale exceptions, the “black swans” that conventional models of normality cannot detect.