A network-centric approach to managing risk

Abstract

The strategies of many large organisations are underpinned by top down, hierarchical management, complex forecasting and predictive modelling, standardised processes, siloed business units, division of labour, information biases and disjointed stakeholder management. Rigid and inflexible organisations are struggling to respond to the risks associated with unpredictable, ever changing and complex operational environments.

Budget blowouts into the billions of dollars, stretched resources, increasing governance, social and political interdependencies and a complex playing field that is constantly changing as it grows and matures is what oil and gas companies in Australia today face. Proponents of Australia’s massive LNG boom are doing the hard yards and they are feeling the pressure.

Unfortunately with pressure comes poor decision-making. Lack of access to evidence-based and up-to-date, real-time information means decisions are often made based on intuition or unqualified, out-of-date information due to immature systems. Research has clearly proven that intuitive decision-making results in cognitive biases. These biases results in perceptual blindness or distortion (seeing things that aren’t really there), illogical interpretation (being non-sensical) and inaccurate judgements (being just plain wrong). Without a system in place to manage risks in it’s operational space, companies will continue to make poor decisions that only increase the risks they try so hard to control.

This paper proposes a new approach to better understanding organisational interdependency and risk management through adoption of a network-centric approach. It explores the benefits of a network-centric approach and how it can be applied in a multi-dimensional environment to not only reduce risk events and costs but enable a truly resilient and competitive business.