Pendulums vs. Professionals

Risk management, in most corporations, is 'subcontracted' to professionals; typically a construct such as an Audit and Risk Committee. The problem is that many of those Risk professionals are often out of their depth with respect to risk mitigation.

No Great Shakes

Recently, on 3 April 2024, a magnitude 7.4 earthquake caused huge amounts of damage in Taiwan.

At more than half a kilometer in height, the Taipei 101 skyscraper was the world's tallest building between 2004 and 2010 (before Dubai's Burj Khalifa surpassed it).

Yet the Taipei 101 survived this earthquake. How did it manage to do so?

Putting a Damper on Things

Tall buildings have to be able to survive threats such as wind-speed-caused pressure and earthquakes. One of the ways in which engineers achieve that is to use so-called Tuned Mass Dampers (TMDs).

The Taipei 101's uses a very-heavy-pendulum TMD system. The movement of the pendulum counteracts some of the structure's movement and can reduce the building's swaying by up to 40%.

This TMD solution worked and it also worked about a year ago during another (6.8 magnitude) earthquake there.

Engineers solve problems using mathematics and physics. When they gather the available information and do the calculations correctly, they successfully mitigate risks.

Science and Information

We regularly encounter Audit and Risk Committee members that are out of their depth when it comes to recommending (or, even worse, dictating) certain types of risk mitigation actions. Their science and their information do not apply where they assume it applies.

Risk mitigation it is a supremely important part of ensuring outperformance. Misguided mitigation actions reduce the likelihood or size of outperformance.

Tried and Trusted?

As the world gets more complex, risk mitigation also gets more complex.

Many risk managers have little or no access to the science and information that underpin many modern elements of innovation, creation and venturing. So, they fall back on their tried and trusted mitigation solutions - assuming that what worked before, or what worked elsewhere, will work here now too.

But, far too often, these approaches won't work. And, in many cases the risk mitigations will lead to bigger issues or bigger risks than those risks that were supposed to have been mitigated.

We have even observed cases where the mitigations seemed to have 'fulfilled the prophesies'. There may, for example, have been an identified risk of IT not being able to make their deadlines. The mitigation, of appointing more people, often then lead to slower delivery. So, those who formulated the mitigation approach frequently then consider themselves to have been correct, but not having mitigated 'enough'. Doubling down and digging the company deeper into this hole then becomes a possibility. If this continues IT's delivery ability slows down further and will eventually stagnate. This certainly is the case in many large corporates while the root causes are usually not understood.

What are the types of information that can prevent these mitigation mistakes? Knowledge of applicable inputs such as Brooks' law and the need to improve Separation of Concerns before adding people would have helped in this example.

Yet, given their their unique corporate status and role, risk mitigation approaches from the risk-professionals often become decrees. Those with more information and more knowledge of applicable science, and who therefore have a better understanding, are then forced to implement these edicts.

The answer?

Most of us will probably be able to determine that an extremely tall building, located between the Pacific Ring of Fire and the Philippine Sea Plate, will be at risk during earthquakes.

So, yes, we will be able to identify that risk. But, very few of us will know how to mitigate that risk. We must leave that task to the scientists; the engineers.

The same approach must be followed where modern technologies (and also modern ways of working) underpin your venture (as it almost certainly will).

Tragically, the leave-mitigation-to the experts answer is still pervasively ignored in South African businesses. The input and advice from the experts are often not even sought, or the expert inputs are simply ignored. Outperformance is then negatively impacted.

And, if you want to know more about TMDs, this link contains a very simple visual illustration of how this concept works. And this link explains how and why the Taipei 101 was fitted with this giant TMD pendulum.