Climate Change – Making sense of frontier risks and identifying early warning signs (Gail Whiteman, WEF)

Conventional wisdom advises us to focus on the mega risks – the “grey rhinos” – in our near future. While these high-impact, high-likelihood risks can’t be ignored, in dynamic systems it’s also the small stuff that could represent early warning signs of bigger trouble on the horizon, the “frontier risks”.

Frontier risks are characterized by unknown likelihoods, unknown impacts, or both. These risks emerge as new technologies surface, new territories are breached or societal forces shift. Examples of frontier risks could include the militarization of space, unexpected climate feedbacks or a human engineered pandemic.

Sensemaking, an interpretative theory in organizational and management research, provides one explanation of why this is. Experts says humans tend to attach meaning to the things we’ve noticed until we develop a plausible story. This story then guides future sensemaking. But the first step – noticing – is the most basic and important because what we don’t notice can hurt us.

Prominent management and risk scholars are interested in this theory because the ability to make sense of complex, ambiguous or uncertain situations improves the performance of teams and organizations over time. Research has shown that individuals and groups bounce back after surprises when they are able to effectively make sense of weak cues arising from a situation, and share this across actors. Sounds easy, right?

People also tend to rely too much on past experiences and routinely miss out on new things. And the farther away we are from a situation, the harder it is to pay attention to it. Most of the time this doesn’t matter. But with frontier risks — risks emerging in new realms of human advancement — it does.

Take commercialization of outer space, for instance. Momentum to push toward this new frontier may rest upon the successes of the past, which could blind decision makers toward new risks that might be emerging in this realm, such as increased space debris, or growing geopolitical tensions in space. Frontier risks also exist in the environmental and social realm. For example, a rapid, massive methane release if Arctic permafrost melts quickly – an “unknown unknown”. Or unintended consequences of AI weaponry or large-scale geoengineering projects.

The good news is that we do know what qualities help groups and organizations build a common sense of a situation. The key is to routinely make sense of weak cues and build an inter-organizational and networked culture.

According to experts, organizations that expect volatility and uncertainty, track small failures, and rely upon front-line local knowledge, can build a dynamic situational awareness which allows them to anticipate and contain surprises. The ability to make sense of weak cues builds resilience.

It is also essential to listen to the experts – those who have deep knowledge of a particular area as well as on the ground workers and local citizens. Both groups comprise individuals who are routinely paying attention to fluctuations in the environment. This kind of knowledge is valuable for managers and communities around the world, even when they are located far away from glaciers and flash floods, or other systemic trends that may not seem obviously related to their business at first glance, or carry significant trade-offs.

Yet there are initiatives to build on. For example, Swissgrid, the electrical network operator in Switzerland, operates a RiskTalk app and associated team that provides all employees the ability to report issues that could create risks for the strategy, operations, or safety of the organization. It also regularly convenes risk workshops for employees in which risks are discussed and strategies are put in place to deal with them.

Even with these best practices, however, there are still challenges. For instance, it’s not easy for most of us to gain an in-depth understanding of ocean physics, virology, or blockchain on short notice. Climate science, new technologies, and shifts in human communications are not covered in detail in most MBA programmes.

Similarly, in the ecological realm, climate scientists, senior executives, government officials, members of indigenous communities and local citizens may not regularly interact. How can we collect and synthesize sensemaking across these groups? How can business managers and local municipalities more effectively utilize and act upon this kind of expert sensemaking? And can the media synthesize this data and make it digestible for us?

One way to synthesize and communicate data could be to develop a global risks dashboard that compiles transparent, real-time and longer term trend data, which is supplemented by risk analytics. A good model for this is the COVID-19 dashboard developed in the early days of the pandemic by the Center for Systems Science and Engineering at Johns Hopkins University. Such a tool for frontier risks could be immensely useful in tracking the small shifts in trends that could lead to high-impact disaster.

Regardless of the tool, however, we must try to make sense of frontier risks. As anthropologist Ann Fienup-Riordan, and Eddy Carmack, Arctic Oceanographer, explain, “In a world repeatedly exposed to change, surprise, and the collapse of crucial socio-ecological systems, it is more than ever imperative to close the gap between knowledge and policy. This is not easy; it means making full use of all forms of knowledge available to us as a species.”. This will require a paradigm shift within and across organizations – moving away from self-orientation and toward system orientation. Only then can we effectively build a resilient and interconnected approach to managing frontier risks.