I recently helped Warner North with a project for the International Risk Governance Council (IRGC) in Geneva. Warner is long time colleague and a National Associate of the National Research Council.
The IRGC topic was how to manage emerging risks. Things like the Gulf Oil spill, PG&E’s gas pipeline explosions, financial collapse, etc. The paper we wrote is on the IRGC website. After the project was over we were asked to do a seminar on framing emerging risks for graduate students in the Management Science and Engineering Department at Stanford University. It gave us an opportunity to reflect on what we had learned in the IRGC project.
A key framing question is, “What systems do we have to consider? ” For the Stanford seminar I constructed a Venn diagram of the ecosystem in which risk management decisions get made.
The focus of our attention is usually at the core of the ecosystem: industry. In the case of the Gulf oil spill the post catastrophe inquiry is focused here. “What did the greedy bastards at BP do to cause this disaster?”
Industry does not act alone. They are part of an overlapping system of regulators, insurers, and industry. To understand industry’s decisions we have to understand the decision making in all three systems and how they interact.
What we can do to manage risk depends on the technology options. I am using technology in the broadest sense. It includes both physical technology and social technology. In this sense, democracy is a social technology. Deming’s process teachings are also “technology.”
At the next level is the economic system: What does it cost? The traditional “cost/benefit” analysis stops at this level in the ecosystem.
More enlightened economists are starting to work at the next level in the ecosystem: The Social System. At the social system level the question is: What do we want? This of course depends on our values.
And finally there is the political system — the top of the decision food chain. Here the question is, What is legal? Political decisions are so difficult because they deal with all the systems.
This diagram answers the question, “Why do we have so many lawyers in politics?” Well, the legal system is all encompassing. It doesn’t mean lawyers understand the ecosystem. They just have the most encompassing frame. This frame was determined when we made two higher level decisions. First, “Are we a nation?” And, second, “Are we going to live under the rule of law?”
It is important to have some sense of which systems we have to consider when we are framing decisions. This diagram offers a part of the framing for any public policy decision — health care, renewable energy, fishery management. You name it.
For more about framing see “Decision Coach’s Guide to Framing.”
For more about public policy decisions see, Public Policy Decisions in California: Big challenges and how they can be met.
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