• Risk
  • Economic Research

The Risk Engineer: Warren Black

Warren Black is a qualified engineer, risk professional and complex systems theorist. He established Complexus in 2016 to research how risks need to be controlled within complex organisations, projects and programmes. AIQ asks him whether current risk management practices are adequate in a world transitioning into the Fourth Industrial Revolution.

Warren Black

Complex risks have increased in the last few decades. Why is that?

Complex systems and related phenomena have always been part of our existence, from the beginnings of the Earth. How the sun interacts with the tides – that’s a complex system. How the rainforest keeps the flora and fauna alive is another complex system. We’ve always been aware of complex systems.

But they have only become part of our mainstream conversation and corporate agendas in the computer age. As the world moves closer to the Fourth Industrial Revolution (an extended period of mass-scale technological, political and societal change), complex systems have in turn become more and more visible to the typical practitioner.

Of particular relevance is how, within the next 30 years, we will live on a fully digital Earth. The whole world is going to be a series of interconnected, complex, intelligent systems – collecting data, storing data, analysing data, sharing data and adapting to data. That’s the way the world is moving.

How could this impact the way governments, companies and societies manage risk?

Seven or eight years ago, I found myself head of risk for one of the largest natural gas programmes in the world. My team and I observed that the speed at which risks were emerging, changing and adapting was so quick we couldn’t keep up using conventional risk management tools and analysis. We recognised there was something missing; that if you took a stock-standard risk management approach, it just didn’t work. These standards assumed risks were linear and could be managed in a step-by-step manner: identify the risk, measure the risk and treat the risk.

That works fine if you’re dealing with a simple, logical and cause-and-effect risk. But if you’re dealing with a highly dynamic risk, which creates continuous shifts in relationships, then the idea of identifying, measuring and treating the risk in a linear, step-by-step fashion does not work because the risk is continually adapting and changing.

Nothing can be predicted or proactively controlled when there is chaos

Consider how at the highest level of complexity you have chaos. Nothing can be predicted or proactively controlled when there is chaos, so conventional risk management techniques don’t work in environments of advanced complexity.

What are the implications of this complexity?

For the last six years, I’ve been focusing on how we control risks in complex, dynamic, systems-driven environments. As fate would have it, in 2020 COVID-19 hit. I didn’t predict the coronavirus, but I did say that as the world gets more and more systemically complex and interconnected, the scale of the risks we will experience will increase and have global implications. Today we have COVID-19, but tomorrow it could be a global supply-chain disruption. A year or two from now, somebody could hack the Internet. How many professions would come to a complete standstill if the Internet went down? And it is not implausible somebody could hack the Internet given how sophisticated technology is becoming.

Nothing is happening on a localised scale anymore. Our risks are now more systemically complex, more adaptive, more agile. Conventional risk management techniques don’t work at this level, and for that reason risk management has some catching up to do to deal with the increased complexity, dynamism and systemic interdependencies in the world.

How do you think we should be responding to COVID-19?

If you take COVID-19, a global pandemic, we had decades of repeated, institutional warnings of the inevitability of a mass-scale, global pandemic. The World Health Organisation, the World Economic Forum, UNICEF and countless other bodies consistently warned us there was an inevitable global pandemic coming.

On top of that, we also had numerous dry-run misses: SARS in 2003; SARS in 2007; MERS in 2015 and countless others. Despite this, when COVID-19 did come along, the only mitigation effort we had ready was to put billions of people under house arrest, shut down economies and compromise our children’s futures. We knew it was coming, yet we weren’t prepared.

We have to prepare a genuine, strategic, proactive response to all those macro-global threats that are both known and inevitable

If this is how we are going to deal with every major pandemic or risk that comes down the line, we are in deep trouble. So, the single biggest thing we have to do differently is prepare a genuine, strategic, proactive response to all those macro-global threats that are both known and inevitable.

What are some of the key risks you see on the horizon?

There are all the natural risks of course; climate change is a big concern. If there is one thing we’ve learned from COVID-19, it’s that we are not ready to deal with climate change. But it’s not just climate change. There are numerous other risks, such as the growing disparity between the rich and the poor, which must be addressed.

If you were to ask me what the big organisational risks are, a big one is the impact of the Fourth Industrial Revolution. Many organisations and the people they employ don’t truly understand how quickly the world is going to change in the next two decades. This creates a massive threat for the future workforce because it takes 20 to 30 years to build up expertise in a particular management discipline, and the world is changing so quickly there are not going to be enough skills and expertise to deal with the knowledge requirements in future.

If you’re a company suddenly flooded by smart technologies, but only five per cent of your employees understand them, you are in trouble. The risk is that in five to ten years’ time we will find the working world has far outstripped the available expertise and skill sets within the average organisation. In short, the speed at which technology is advancing is happening faster than the speed at which our labour capability is upskilling.

What should we be doing to futureproof societies and organisations?

I mentioned structured upskilling and training. If you are a company that employs 5,000 people, you can’t replace 5,000 people overnight; you have to keep them relevant. That is a big part of futureproofing.

One of the things I recommend to my clients is to have five, ten and 30-year transformation plans. The best way to do that is to work with academic institutions and get them to map out how your industry is expected to change over those time periods. Once you can see how the industry is expected to change, you can start to build up adaptive workforces and capability development strategies. I see more organisations doing that, but not the majority and that is a concern.

Want more content like this?

Sign up to receive our AIQ thought leadership content.

Please enable javascript in your browser in order to see this content.

I acknowledge that I qualify as a professional client or institutional/qualified investor. By submitting these details, I confirm that I would like to receive thought leadership email updates from Aviva Investors, in addition to any other email subscription I may have with Aviva Investors. You can unsubscribe or tailor your email preferences at any time.

For more information, please visit our privacy notice.

Related views

Important information


Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation.

In Europe, this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK, this document is by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL) for distribution to institutional investors only. Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and Asian Exempt Financial Adviser for the purposes of the Financial Advisers Act (Singapore Statute Cap.110). Registered Office: 138 Market Street, #05-01 CapitaGreen, Singapore 048946.

In Australia, this material is being circulated by way of an arrangement with Aviva Investors Pacific Pty Ltd (AIPPL) for distribution to wholesale investors only. Please note that AIPPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIPPL in respect of any matters arising from, or in connection with, this material. AIPPL, a company incorporated under the laws of Australia with Australian Business No. 87 153 200 278 and Australian Company No. 153 200 278, holds an Australian Financial Services License (AFSL 411458) issued by the Australian Securities and Investments Commission. Business address: Level 27, 101 Collins Street, Melbourne, VIC 3000, Australia.

The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom.

Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is based within the North American region of the global organization of affiliated asset management businesses operating under the Aviva Investors name. AIC is registered with the Ontario Securities Commission as a commodity trading manager, exempt market dealer, portfolio manager and investment fund manager. AIC is also registered as an exempt market dealer and portfolio manager in each province of Canada and may also be registered as an investment fund manager in certain other applicable provinces.

Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas is also a commodity trading advisor (“CTA”) registered with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606.