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Disruptions: Balancing Alarmism with Inadequacy
Disruptions happen. And, according to McKinsey, they’re happening more frequently. The pandemic, geopolitical problems, cyberattacks, energy costs, climate change and extreme weather, etc.. These have all been problems that have challenged industries in multiple ways in recent years.
McKinsey’s study estimates that disruptions lasting for a month or longer now happen about every 3.7 years for many businesses. Globally, many industries were hit hard by COVID-19. Japan has been hit by the 2011 Tsunami and earthquakes. The US has been hit by Hurricanes of major force, like Katrina and Harvey. The global list of crises and disruptions is a long one.
The best advice for being able to minimize damages and be able to bounce back after disruption and adversity is to anticipate future problems before they happen. But, that advice is much easier said than done. From boxing to business, it’s wise advice to anticipate problems and be agile in your response, but that advice is too scattershot and often very difficult to implement because there are too many possible risks to prepare for, and many of the risks are outliers, unlikely to occur, and which can require significant resources to prepare for. Over preparation presents a risk in itself — resources are in effect wasted when a problem never ultimately occurs. Balancing the cost of risk mitigation against the risk can be a tricky problem.
In the case of the pandemic, US Health and Human Services Secretary Michael Leavitt in 2007, summed it up when he said that “everything we do before a pandemic will seem alarmist, and everything we do after a pandemic will seem inadequate.”
