A strategic- and tactical model for managing complex risks in social systems

Abstract

Complex risks are unique as they emerge from potentially undetectable sources into problematic situations often with high- and lasting impact, such as the COVID-19 pandemic. Their emergent nature, starting with weak signals, renders the traditional risk management approach of risk identification less effective. Assigning probability estimates can also be difficult because some complex risks, such as pandemics, are certain to emerge. To address these challenges, the literature is reviewed to understand complexity, complex risks, risk management and risk communication and more. One key insight is that the maneuverability inherent in the Observe-Orient-Decide and Act (OODA) model used in maneuver warfare is beneficial for managing complex risks. Another important insight is that management and communication cannot be treated as separated and sequential processes. Hence, to manage complex risks, a model based on the OODA model is developed with more explicit focus on risk communication through active leadership. The financial crisis and the COVID-19 pandemic are used throughout the paper to illustrate key points. Operationalization of the model is future work.