- Opinion & Analysis
- Read Time: 24 min
There’s no sense in denying it: interpreting weak signals into useful decision making takes time and focus. These three stages can help you see the periphery—and act on it—much more clearly.
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The global financial crisis that occurred in 2008 can be viewed as a systems accident that was fueled, in part, by innovations in the financial sector.
“If there are human operators in the system, they are most likely to be blamed for an accident,” writes MIT professor Nancy Leveson. She thinks traditional thinking about the causes of industrial accidents is limiting, in that the model used is that of chains of events leading back to the cause or the accident. A better model for today’s complex, automated systems: thinking of reasons why accidents occur rather than specific causes.
An organization’s ability to recover from disruption quickly can be improved by building redundancy and flexibility into its supply chain. While investing in redundancy represents a pure cost increase, investing in flexibility yields many additional benefits for day-to-day operations.
By understanding the variety and interconnectedness of supply-chain risks, managers can tailor balanced, effective risk-reduction strategies. The authors show how smart companies use “stress testing” to identify parts of the supply chain that might break in the event of a natural disaster, terrorist strike or other upheaval. They then explain a variety of ways that supply-chain partners can collaboratively prepare for and effectively manage risk.
Although large-scale risks garner media attention, it is the everyday, small-scale risks associated with a lack of transparency in countries’ legal, economic, regulatory and governance structures that can confound global investment and commerce. New research identifies the causes and measures the effects of this phenomenon.
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