Uncertainty in times of Covid-19
Image from the John Hopkins Univesity site on Covid-19 at the early phase of the crisis, with the epicenter still in China on february 23rd 2020.
We are in the middle of a critical juncture, and the bifurcation of the road is not visible, we are searching for the forking paths, stuck in the middle of an unprecedent crisis (Jacquinet & Bussotti 2020).
What does it mean to manage in a world as an out-of-order automaton?
The world has suddenly stopped its normal course, so does the management of organizations and public policies.
The catastrophe we are in surprised us doing our daily task, in a slow-motion film. It is a little bit like Pompei instantaneous stop of normal life, with one difference, we are still moving, much more slowly, and only at a local level. In our daily space, if we run, we are, anyway and anywhere, caught in the line in the supermarket or the pharmacy, the hospital or the post office.
Globalization has suddenly stopped, and the economy had ground to a halt, without much public transport, air travel and industries and services either closed or on maintenance mode.
Risks and uncertainty
The notions of uncertainty and risks are connected but distinct. The notion of uncertainty is more diffuse and continuous, it results from the complexity and unpredictability of events and the ignorance of human subjects. It has a radical and extreme form, such in wars and pandemics and a mild form in relatively stable institutional, social, economic and political settings. It is difficult to specify and depends much on the interconnectedness of the world.
Risk is a more specific aspect of uncertainty, it is limited to a part of reality, like natural catastrophe, political unrest, exchange rates fluctuations, accidents, etc. It is more discrete than continuous, more specific than diffuse. Risks are of different nature and intensities.
Risks and uncertainty are related. The category of risks that are highly correlated to contexts, complexity, network effects are usually referred to as systemic or global risks. Organizations, institutions, agents and citizens talk much about risk daily. It is integrated in models and decisions process, except for systemic risks and uncertainty and risks that are not frequent and anormal, like the Covid-19 outbreak. Systemic or global risks such as economic and financial crisis, nuclear accidents, tsunamis, earthquakes, and serious contagious diseases are often downplayed after the event has passed. This is the case with the deregulation of the financial sector before the 2008 crash and the current pandemic, which followed two others in the present century.
A crucial – and often obfuscated – aspect of risk is the question of who bears the costs and responsibility of risk. It also means who share the risk and its consequences and who don’t (Jacquinet & Bussotti, 2019). Very often, the risk is shared unequally, with the powerful trying to shield themselves from assuming any payment or consequence, namely by designing an intermediary or contract that deviate attention and responsibility to straw man and organizations. In a way, corporations are not just a tool for entrepreneurs or investment to take risk and being compensated for it but are rather organizations that protects the accumulated wealth of powerful individual and creating an artificial smokescreen that absorb the aleatory consequences of unexpected events.
Cases of corruption and business assemblage of intricate network of corporations are good examples of shielding oneself from the consequences of risky and fragile corrupt business deal. To let corporations burst, while having already extracted a lot of cash-flows: These are the “art of the deal”. Often contracts help the shielding of risk and the screening of what an investor accepts or does not accept in a business agreement.
Jacquinet, Marc; Bussotti, Luca (2020) Management in a time of radical uncertainty (to be published).
Jacquinet, M., & Bussotti, L. (2019). MANAGING SUSTAINABILITY: THE ROLE OF MULTINATIONAL CORPORATIONS IN THE GLOBAL SOUTH. Problems of Management in the 21st Century, 14(1). http://oaji.net/articles/2019/450-1562410447.pdf