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Managing for the unknown

(MoneyWatch) It's not what you know but rather what you don't know that will keep you awake at nights.

That is a good saying that received some validity with a citation in Bloomberg Businessweek of findings by Professor Nick Bostrom, director of the Future of Humanity Institute at Oxford University. Among the dangers - in order of severity - threatening mankind with eminent danger are machine super-intelligence, nanotechnology weaponry, nuclear war, synthetic biology and climate change*. Second on that list is "unknown risks."

In other words, the unknown force over the horizon is what may bring catastrophe. For example, a century ago would scientists have conceived of nuclear war, nanotechnology or even malevolent artificial intelligence?

While the perilous unknown may be the stuff of sci-fi and doomsday movies, the potential for danger is always around us. This should not provoke paranoia but rather a healthy sense of vigilance as well as skepticism. Executives need to be vigilant about what could happen next - pandemics, earthquakes and wars, but they should also be skeptical about their effects on their organizations.

For example, if financial executives had been more vigilant and skeptical prior to the fiscal meltdown of 2008 some businesses may not have found their institutions so overleveraged. Hindsight is always 20/20.

So what is a savvy executive to do? Three questions come to mind.

What is the worst that could happen to us?
This question prompts many scenarios from a natural disaster to a market crash, or even the entry of a significant new competitor who changes the balance in the market place. What happens then? Executives need to keep their antennae up.

How would we react?
Very often companies have disaster plans. But are they robust? That is, do they stipulate what happens when resources are not available or executives and employees are separated from each other.

Do we have the right people in place to recover?
This is perhaps the most important question. Very often members of a leadership team are equipped to manage when the going is good, but what happens when the bad gets into fear? The senior leader must ask if these people have right mindset to adapt to changing circumstances. Flexibility becomes an imperative, but so too does resilience. You need leaders who can cope with setback and maintain the discipline to persevere.

Big questions provoke big picture thinking. Very often such questions will cause real unease, or at least a sense of disruption. And that is healthy. If a catastrophe strikes disruption will be significant. So what will you do to survive.

A classic tale in this regard is the story of Ernest Shackleton's quest to lead the first expedition to cross the Antarctica in 1914. After his ship, the Endurance, which had been moored in ice for eight months and broke up unexpectedly, Shackleton shifted priorities from exploration to rescue. A deed he accomplished under incredible hardship. The worst happened but Shackleton had the wherewithal - as well as the right leadership team - to ensure the rescue of every single man in the expedition.

Maintaining vigilance about dangers when balanced with a sense of healthy skepticism fosters a mindset that takes nothing for granted but focuses attention on what can be done to improve the current situation as a means of preparing for a healthy future.

*Note: According to Prof. Bostrom, climate change is real but it is not likely to affect public health and welfare in the immediate future.

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