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I know it from long time ago. It was there from Flu-A. Is for that reason I worte in some forums that Corona Virus is not a surprise. Then, as you know, you can consider things like risks or not and according to that you can create the associated strategy. In this case Winbledon Committee consider this risk as low probability-high impact then they selected to transfer it. Is not about others neglected. Is about others do not think it will be a risk that deserves to be taken into account.
Perhaps someone in the Wimbledon risk management committee had seen the movie "World War Z" and was thinking about "Black Elephant" scenarios when they negotiated the insurance contract.
The ability to identify but, more important, get stakeholder buy-in to act on such low probability but extreme impact risks requires a combination of the "right" risk managers with cultural support for talking about risks and acting on them.
Thanks for your inputs.
I agree with your statement as the most probable one:
"Winbledon consider this risk as low probability-high impact then they selected to transfer it. Is not about others neglected. Is about others do not think it will be a risk that deserves to be taken into account."
Based on my experience, I wouldn't be surprised if some major events (as big as these tournaments or bigger) ever considered this sort of risk.
We'll probably see many of these changing their positioning next year :)
I agree with Joao, Others responded different.
There are numerous parts to risk management; identification, analysis, and response. In the case of Wimbledon it was identified, analyzed to be significant in terms of impact and the response chosen was transfer to insurance. This proved to be beneficial in this case.
Had the event been delayed, the impact less significant and the payout reduced the benefit may not have been so obvious. If the cost had been greater than the benefit the decision would not have seem so fortuitous.
Others may: 1) not have recognized the risk, 2) analyzed it to be of lower impact/significance, or 3) decided to absorb the impact.
So, let's not jump to the conclusion that others did not give it appropriate attention or even recognize the risk. Maybe they just took a different path.
That's the challenge of risk management - one size doesn't fit all. Cut-and-paste can be detrimental to the project.
The best thing to learn from this is when planning for emergencies, think of the most outlandish and improbable scenario and plan for that.
Dinosaurs riding meteors coming back to Earth to reclaim it? Sure why not. How would we manage that event? What risks and opportunities exist? What would be the results? Then apply a real world scenario and see how the responses and planning apply.
Kiron mentioned it exactly-a "black elephant". Most people don't believe in them, but they exist. Just like unicorns exist because if they didn't Scotland wouldn't have chosen them to be the national animal.
As always, loved your references and quick wit :)
I wonder how many times we see such 'stakeholder buy-in' and a 'combination of the "right" risk managers with cultural support for talking about risks and acting on them'?
How do think this will affect the future? Do you think these risks will be dealt with a lot bigger probability and an even extremer impact?
What about other low probability / high impact risks like the meteor falling on London, the tsunami from north sea underwater slides or just plain consequences from global warming?
They might get some insurance money to cover lost income for some time. But there are indirect impacts on them from Corona, like the coming cultural changes in society, economic downfall, or just the compression in their industry of sports events.
If you have low probability / high impact risks which are prone to be mitigated by insurance, it is still possible that the risk event is lethal as consequences go beyond money.
A threat will be assessed differently by every organization, João. On top of that, each organization has a different risk appetite and threshold. You also have to assess whether the monetary compensation for a realized risk makes sense.
All England Club got money that covered the loss of their revenue. (I'm sure a lot of other organizations will suffer from the cancellation.) But what about all other losses? If their supply chain is gone, what will they do next year? If the sports fans stop attending next year, how will this year's money help them?
It will be interesting to see what the All England Club's insurance premium will be for next year.
I believe that for a short while at least, risk management spending may increase across industries, but remember that this will also be at a time when companies are trying to recover financially, so they may not have sufficient reserves to do enough.
Where companies need to do a better job is:
1. Harvesting as many of these black elephant risks as possible during identification.
2. Before putting them on watchlists, identify the early warning signs where possible for these.
3. If those signs emerge, be willing to have an open conversation about how to respond to them.
For example, companies in North America could have monitored the news regarding the growing dangers of the pandemic in late December and early January and pre-emptively taken some steps to protect themselves in advance of government actions. Insurance is just one possible response. Others might have been proactively buying shares in companies likely to benefit from a pandemic such as Amazon or Shopify.
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