Foresight in risk governance Chabane MAZRI IRGC/INERIS TMP meeting, 23-25 June, 2014 Lisboa .

1. Foresight in risk governance Chabane MAZRI IRGC/INERIS TMP meeting, 23-25 June, 2014 Lisboa. EPFL, CM 1-517, 1015 Lausanne, Switzerland| tel +41 (0)21 693 8290 | www.irgc.org

2. Key challenges in risk governance Risk • Effects of uncertainty on objectives. • Combination of the consequences of an event and the associated likelihood of occurrence. • (ISO, 2009) Level 1 Level 2 Level 3 Level 4 Deep Uncertainty A clear enough future Alternate futures (with probabilities) A multiplicity of plausible futures Unknown future Total Ignorance Determinism Context Risks

3. Risk semantics Risk • Effects of uncertainty on objectives. • Combination of the consequences of an event and the associated likelihood of occurrence. • (ISO, 2009) • Uncertainty about and severity of the consequence of an event or an activity with respect to something that human values (Aven and Renn, 2011). Level 1 Level 2 Level 3 Level 4 Deep Uncertainty A clear enough future Alternate futures (with probabilities) A multiplicity of plausible futures Unknown future Total Ignorance Determinism Context Risk

4. Risk semantics Level 1 Level 2 Level 3 Level 4 Deep Uncertainty A clear enough future Alternate futures (with probabilities) A multiplicity of plausible futures Unknown future Total Ignorance Determinism Context • Multiple terminologies: • New risks • Uncertain risks • Emerging risks • Risky risks Risk

5. Challenges in risk governance • Uncertainty • Lack of knowledge • Indeterminacy • Variability in vulnerabilities and behaviours. • Complexity • Multiple and intractable set of interactions. • Emergence of new properties. • Non linearity. • Dynamic environments. • Increased pace of innovation. • Worldwide competitiveness. • New needs and behaviours. • Legitimacy of decisions • Not inherited, to be built! • Inclusiveness. • Conflicts in values and rationalities.

6. Challenges in risk governance • Uncertainty,Complexity and Legitimacy appeal for: • More precaution, less risks. • Careful and in-depth analysis of mechanisms and interactions at hand. • Enhanced risk communication. • More participatory (costly and risky) decision processes. • Dynamic and highly innovative environments requires to: • be the first to sense and seize the opportunities; • demonstrate rapid profitability; • Early recognition and integration of risks (safe design).

7. Challenges to risk governance • Cerf.C; Navasky.V (1984). The experts speak. New York: Pantheon books.

8. Let’s look out of the box • The first good news of this speech! Risk managers are not the only folks confrontedwiththisdilemma!!! • Dynamic capabilities literature • Doing business is confronted with fast moving, uncertain and complex environment (Teece, 2007). • Organisations need to create the capabilities allowing: • The understanding of organisation’s complex environment. • Being the first to sense, filter, shape and seize business opportunities. • Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfundations of (sustainable) entreprise performance. Strategic management journal 28 , 1319-1350.

9. Let’s look out of the box • Innovation management literature • Innovation is a key target of many organisations strategies, ranging from SMEs to countries! • Environmental factors driving innovation. • Framework for managing innovation. • Sheth, J. N., Ram, R. (1987). Bringing innovation to market: How to break corporate and customers barriers. New York, Wiley. • Goffin, K., Michell, R. (2010). Strategy and implementation using the penthatlon framework. 2nd edition. Palgrave Macmilian.

10. What’s in common? • Environmental trends • Complexity, uncertainty, high competitiveness. • Technical requirements • Sensing “business opportunities”, “forthcoming risks”, “innovative ideas”. • Detect, scan, scroll the environmental trends. • Understand their meaning for the organisation. • Filtering • Impossible to investigate all business opportunities, forthcoming risks or innovative ideas. • Select the golden nuggets. • Deciding and acting consequently • Shape business opportunities, implement innovation, select risk management options. • Organisational requirements • Strong push from strategic decision making level. • Cross functional thinking. • Deploy adapted incentives and rewards systems.

11. What’s in common? • Environmental trends • Complexity, uncertainty, high competitiveness. • Technical requirements • Sensing “business opportunities”, “forthcoming risks”, “innovative ideas”. • Detect, scan, scroll the environmental trends. • Sensemaking: Understand their meaning for the organisation. • Filtering • Impossible to investigate all business opportunities, forthcoming risks or innovative ideas. • Select the golden nuggets. • Deciding and acting consequently • Shape business opportunities, implement innovation, select risk management options. • Organisational requirements • Strong push from strategic decision making level. • Cross functional thinking. • Deploy adapted incentives and rewards systems.

12. Foresight and risk governance. • The second (and last) good news of this speech! Foresight Deals with the identification, assessment and usage of weak signals to recognize and give warning about threats and opportunities at an early stage (Rohrbeck, Arnold and Heuer; 2007). • Methods and frameworks for early (weak) signals detection, interpretation. Weak signal theory • Methods and frameworks to understand how signals may evolve and combine to shape the future of organisation’s environment Scenario building, future studies.

13. Foresight and risk governance. Level 1 Level 2 Level 3 Level 4 What added value to risk governance? • Shorten delays between the apparition of first signals of risk and engaging in risk management actions. Deep Uncertainty A clear enough future Alternate futures (with probabilities) A multiplicity of plausible futures Unknown future Total Ignorance Determinism Context T

14. Foresight and risk governance. What added value to risk governance? • Shorten delays between the apparition of first signals of risk and engaging in risk management actions. • Salverda, J. (2014). Identifying new and emerging risks of substances. Society for Risk Analysis Conference, Istanbul, Turkey.

15. Foresight and risk governance. What added value to risk governance? • Project decision makers in the future decision contexts they may be facing. • Describe their possible futures. • Help understand the mechanisms at play. • Identify early opportunities for acting on these mechanisms and help shaping a more “friendly” future. What will people be doing with the saved time? Autonomous cars

16. Foresight and risk governance. What added value to risk governance? • Provide decision makers with richer sets of decision options. • Escape the dichotomy Precaution and stagnation VS dynamism and risk taking. • Help identifying early opportunities of action. • Develop adaptive capabilities through robust decision making.

17. Conclusion. • Risk governance facing key challenges: • Deep uncertainty • Complexity. • Legitimacy. • Provide risk managers with necessary lead time to address. • Of course, important challenges are to be considered at cognitive and organisational levels: • Reluctance for change. • Organisational willingness to continuously reassess strategic orientations. • Cross functional interaction. • Incentives and rewards.