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PREVENTION AND PRECAUTION IN BUSINESS AND PUBLIC
MANAGEMENT
Fernando Alcoforado *
The major challenge faced by business ...
2
light on human organizations such as companies, markets, economies and ecology.
Things are more than the sum of its part...
3
alternatives considered. Applied to the business sector, it is necessary determine the
minimum profit provided by each a...
of 3

Prevention and precaution in business and public management

The major challenge faced by business and government leaders in the contemporary era is represented by the need to plan the development of their organizations in a highly complex environment and changes often chaotic. Conventional management models consider administering an activity of negative "feedback", that is, it establishes a strategy and leads the organization in the desired direction with the correction of deviations from the route plan and achievements. At a time when everything changes rapidly, it can be said that the principles governing these models are outdated when applied in an economic environment like the present characterized by instability. To be effective, the business and the public planning process must take into account necessarily the instability, uncertainty, with its turbulence and its risks. One of the great difficulties of the planning process is to minimize the uncertainties when we know that change is the only stable rule at present and the past is less and less as the basis for designing the future.
Published on: Mar 4, 2016
Published in: Economy & Finance      
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Transcripts - Prevention and precaution in business and public management

  • 1. 1 PREVENTION AND PRECAUTION IN BUSINESS AND PUBLIC MANAGEMENT Fernando Alcoforado * The major challenge faced by business and government leaders in the contemporary era is represented by the need to plan the development of their organizations in a highly complex environment and changes often chaotic. Conventional management models consider administering an activity of negative "feedback", that is, it establishes a strategy and leads the organization in the desired direction with the correction of deviations from the route plan and achievements. At a time when everything changes rapidly, it can be said that the principles governing these models are outdated when applied in an economic environment like the present characterized by instability. Moreover, the decisions taken by their leaders at a particular time cannot lead to the desired result because will be inexorably affected by chaotic changes that may occur inside and outside the organization over time. The systems come into a state of chaos when fluctuations that were until then corrected by negative "feedback" get out of control. The development trajectory becomes nonlinear, prevailing trends collapse and in its place comes a range of complex developments. Rarely chaos is a prolonged condition. In most cases, only a transitional period among more stable states. When the fluctuations in the system reach irreversible levels, the system reaches a critical point (bifurcation point) where it collapses into its stable individual components or goes through a rapid evolution toward a state of resistant breakthrough to fluctuations that destabilized. If this path of advancement is selected with the adoption of positive "feedback", the system gives a step ahead evolving to a state in which it has greater efficiency and more flexibility, greater structural complexity and additional levels of organization. To be effective, the business and the public planning process must take into account necessarily the instability, uncertainty, with its turbulence and its risks. One of the great difficulties of the planning process is to minimize the uncertainties when we know that change is the only stable rule at present and the past is less and less as the basis for designing the future. The classical views about the disorder were all derogatory, for science has always been oriented towards the discovery of certainties. All knowledge reduced to the order and all randomness would be only appearance, the result of our ignorance that necessarily will be overcome at some future time. The development of Chaos Theory from the 1970s contributed to the formulation of a very different model that prevailed until then that it was basically deterministic and linear. In the model based on Chaos Theory, the world is more complex and fundamentally non- deterministic and nonlinear. Chaos Theory was imposed from the advance in the understanding of linear and nonlinear processes and especially, with the help of computers. Common use of the term "chaos" is always associated with the disorder. Chaos, in science, is not disorder, "is a order masked of randomness," according to Edward Norton Lorenz, a meteorologist, mathematician and American philosopher who developed the first studies on Chaos Theory. The advent of Chaos Theory came to legitimate disorder and chance in the scientific field. From now on, we can continue conceptualizing some phenomena as strictly deterministic, but it is recognized that such phenomena are the exception in the field of natural events. It soon became clear to some thinkers in the social sciences that Chaos Theory and the Science of Complexity would provided much
  • 2. 2 light on human organizations such as companies, markets, economies and ecology. Things are more than the sum of its parts, equilibrium is death, causes and effects are effects are causes, disorder and paradox are everywhere. Prigogine, Russian chemist naturalized Belgian, winner of the Nobel Prize in Chemistry 1977 for their thermodynamic studies of irreversible processes with the formulation of the theory of dissipative structures, defends the thesis that small random perturbations can be quickly amplified, causing the system to a even greater instability, up to a limit called the "bifurcation point" from which is broken the system structure (an "symmetry breaking"). After the bifurcation point, the system's behavior becomes erratic for some time, but tends to stabilize at a new equilibrium - but qualitatively distinct from the original. The system now features new ways of organization, structurally more complex. It evolved. Most notable in this process is, according to Prigogine, the fact that it is impossible to predict the evolutionary path that the system will take from the bifurcation point. During the phase of instability, the system "experienced" numerous variants of "possible future" before "deciding" for his new stable level of complexity. The whole process is, in short, a process of self-organization, which protects the system from entering the path of entropy, that is, the inexorable decay [PRIGOGINE, Ilya, STENGERS, Isabelle. O Fim das Certezas - Tempo, Caos e as Leis da Natureza (The End of Certainty - Time, Chaos and the Laws of Nature). Sao Paulo: UNESP, 1996 and PRIGOGINE, Ilya, STENGERS, Isabelle Between Time and Eternity Sao Paulo: Companhia das Letras, 1988]. To cope with future uncertainties, public and private organizations should use the scenarios technique adopting the premise that the future is multiple, many futures are possible and the path leading to many futures is not necessarily unique [GODET, Michel. Manual de Prospectiva Estratégica (Strategic prospective Manual). Lisboa: Dom Quixote, 1993]. The essential purpose of scenarios is to present to executives of a meaningful picture of likely future organizations and also unexpected or unlikely future in different time horizons. To deal with the uncertainties of the future, it is critical that preventive and precautionary plans are adopted. Without a doubt plausible future with great probability of occurring are linked to the idea of prevention would be to draw up plans associated with them. The precautionary principle would be used, strictly speaking, to seize opportunities and avoid threats according to a prospective logic, anticipation of future events likely to occur. In the event of unexpected or unlikely future in doubt or uncertainty about its occurrence, it must act also preventing based on the precautionary principle. In this process, you must make plans to cope with the unexpected or unlikely events of the future. Precaution is on potential risks and prevent is on the proven risks [DUPUY, Jean-Pierre. O tempo das catástrofes (Time of disasters). Sao Paulo: Realizações Editora, 2011]. The potential risk corresponds to an event that may or may not occur which cannot be attributed probability. Attention should be paid, therefore, to the distinction between futures unexpected or unlikely on which sits the precautionary principle and the likely futures associated with the logic of prevention. Prevention in this case means the act of anticipating the occurrence of probable future and precaution, in turn, is equivalent to early admission to a care in relation to future unlikely of occurrence. Economic calculation should serve as a basis for decisions related to the plans of prevention and precaution. In deciding on the choice of most appropriate alternative plans, the Maximin and Minimax criteria can be adopted. The Maximin criterion is based on a pessimistic view of the problem. The alternative to be chosen will be the one that is the best among the worst option of all
  • 3. 3 alternatives considered. Applied to the business sector, it is necessary determine the minimum profit provided by each alternative plan and then choose the alternative with the higher minimum profit. If the decision is made taking into account the costs (rather than profit), it is necessary minimize maximum cost. Can adopt also the Maximax and Minimin criteria. The Maximax criterion is based on an optimistic view of the problem. It is supposed to take place the best possible event. The alternative will be chosen as the one that is the best among the best options of all alternatives. Applied to the economic context it is necessary determine the maximum profit for each alternative and then choose the alternative with the greatest maximum profit. If the decision is made taking into account the costs it is necessary minimize minimal cost. Then used the similar criteria to Maximax criterion, which is the Minimin criteria. Finally, we can use the criterion of Hurwicz, intermediate between the most pessimistic (Maximin) and the most optimistic (Maximax).  Fernando Alcoforado, member of the Bahia Academy of Education, engineer and doctor of Territorial Planning and Regional Development from the University of Barcelona, a university professor and consultant in strategic planning, business planning, regional planning and planning of energy systems, is the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012) and Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015).

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