How to make wise decisions in the global environment of surprises?
Leena Ilmola
International Institute for Applied Syst...
Structure
1.What to think about uncertainty, surprises and resilience?
2.How to be prepared if we do not know what is go...
1. WHAT TO THINK ABOUT UNCERTAINTY, SURPRISES AND RESILIENCE?
Everybody speaks about resilience
Uncertainty
The percieved probability of the financial market events in Sept 2008 was 0,00000000000000000000007
•Uncerta...
What do we mean with resilience?
Awareness
Adaptation
Agility
Active learning
Capability to succeed in the environmen...
2. HOW TO BE PREPARED, WHEN WE DO NOT KNOW WHAT IS GOING TO SHAKE OUR COUNTRY?
Sources of resilience
Policy resilience
Basic Assumptions of the policy
Economic growth will continue after a dip
Our economy is based on our...
Policy as a source of resilience
Basic Assumptions of the policy
Economic growth will continue after a dip
Our economy ...
Policy vulnerability
Basic Assumptions of the policy
Economic growth will continue after a dip
Our economy is based on ...
3. HOW TO KNOW WHAT IS NEEDED?
No survivors; succeed or die
How to make it to be resilient to everything?
Our solution is to find a subset of actions that increase our capability to...
Example: Finland - Resilient Portfolio
1
2
25. Invest in trade outside the EU
24. Create Finnish Mittelstand to replac...
4. HOW TO MAKE WISE DECISIONS IN THIS ENVIRONMENT?
Policy decisionmakers ask
Example: Discovery of sources of resilience
•Intermediate consumption
•Local owners
•Small is beautiful
Example: Stress testing and policy options for South-Korea
5. HOW TO MAKE IT HAPPEN
From words to action
Diagnosis, development, results
0
2
4
6
8
10
O culture
O speed
O trust
O experience
S structure
S investment
...
IF possible in making decisions
Chose the option that
•Increases portfolio’s diversity
•Increases multi-skilled people ...
Thank You!
Please contact: ilmola@iisa.ac.at
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Naec 29 9-2014 ilmola risk resilience

Published on: Mar 3, 2016
Published in: Economy & Finance      
Source: www.slideshare.net


Transcripts - Naec 29 9-2014 ilmola risk resilience

  • 1. How to make wise decisions in the global environment of surprises? Leena Ilmola International Institute for Applied Systems Analysis (IIASA) The Global X Network
  • 2. Structure 1.What to think about uncertainty, surprises and resilience? 2.How to be prepared if we do not know what is going to shake our country? 3.How to make wise decisions in this environment? 4.How to know what is needed? 5.How to make it happen?
  • 3. 1. WHAT TO THINK ABOUT UNCERTAINTY, SURPRISES AND RESILIENCE? Everybody speaks about resilience
  • 4. Uncertainty The percieved probability of the financial market events in Sept 2008 was 0,00000000000000000000007 •Uncertainty with probability –Metro train uncertainty –Coconut uncertainty •Fundamental uncertainty –Black swans –Xevents Strategic planning Risk management Resilience building
  • 5. What do we mean with resilience? Awareness Adaptation Agility Active learning Capability to succeed in the environment that is dominated by uncertainty. Performance (GDP) Time
  • 6. 2. HOW TO BE PREPARED, WHEN WE DO NOT KNOW WHAT IS GOING TO SHAKE OUR COUNTRY? Sources of resilience
  • 7. Policy resilience Basic Assumptions of the policy Economic growth will continue after a dip Our economy is based on our existing international companies Political powers do not want to shake growth. We belong to EMU Climate change is mitigated WHAT IF …… Next low growth period will be 20 years long A comp. bankruptcy, B chopped and C is acquired by a Chinese competitor Sudden power play or window of opportunity opens EMU collapses Next Ice Age hits Strong education Agile fast reaction Strong Trust Long term trade partners We have access to cheap energy Supports Strongly ------------------------- > No Impact ----------------------------------------> Lethal Impact
  • 8. Policy as a source of resilience Basic Assumptions of the policy Economic growth will continue after a dip Our economy is based on our existing international companies Political powers do not want to shake growth. We belong to EMU Climate change is mitigated WHAT IF …… Next low growth period will be 20 years long A comp. bankruptcy, B chopped and C is acquired by a Chinese competitor Sudden power play or window of opportunity opens EMU collapses Next Ice Age hits Strong education Agile fast reaction Strong Trust Long term trade partners We have access tp cheap energy Supports Strongly ------------------------- > No Impact ----------------------------------------> Lethal Impact education Agile fast reaction Strong Trust Long term trade partners We have access to cheap energy
  • 9. Policy vulnerability Basic Assumptions of the policy Economic growth will continue after a dip Our economy is based on our existing international companies Political powers do not want to shake growth. We belong to EMU Climate change is mitigated WHAT IF …… Next low growth period will be 20 years long A comp. bankruptcy, B chopped and C is acquired by a Chinese competitor Sudden power play or window of opportunity opens EMU collapses Next Ice Age hits Strong education Agile fast reaction Strong Trust Long term trade partners We have access tp cheap energy Supports Strongly ------------------------- > No Impact ----------------------------------------> Lethal Impact education Agile fast reaction Strong Trust Long term trade partners We have access to cheap energy
  • 10. 3. HOW TO KNOW WHAT IS NEEDED? No survivors; succeed or die
  • 11. How to make it to be resilient to everything? Our solution is to find a subset of actions that increase our capability to succeed in all of these potential situations. internet nuclear EMU 0 eur ENERGY FEDERAL EU
  • 12. Example: Finland - Resilient Portfolio 1 2 25. Invest in trade outside the EU 24. Create Finnish Mittelstand to replace Nokia 23. Exploit our neutral and apolitical reputation 22. Specialize in fast piloting 21. Make Finland the center for Asian and Russian connections 20. Establish a Nordic monetary union 19. Switch to exchange economy with no currency 18. Train workforce as the reserve for global companies 17. Manage a single global service 16. Commercialize forest into an investment product 15. Build more nuclear power to hedge against price shocks 14. Let the forest industry disappear 13. Invest in new rapidly exploitable knowledge combinations 12. Finland a global IT-service center for public authorities 11. Invest in sustainable well-being know-how 10. Develop services that require little energy 9. Create an ICT-ecosystem 8. Tax incentives for urban local food 7. Tax incentives for energy self-sufficient housing 6. Promote innovation for a rainy-day 5. Increase respect for every type of work 4. Prepare to increase self-sufficiency in food production 3. Take care of small networked production 2. Security and resilience requirements for information networks 1. Invest in maintaining trust in the society 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IIASA/ 7 Shocks and Finland project Liesiö & Ilmola Portfolio size the EU Nokia reputation piloting connections union currency companies service product shocks disappear combinations authorities know-how energy ecosystem food housing rainy-day work production production networks society 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Portfolio size 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0
  • 13. 4. HOW TO MAKE WISE DECISIONS IN THIS ENVIRONMENT? Policy decisionmakers ask
  • 14. Example: Discovery of sources of resilience •Intermediate consumption •Local owners •Small is beautiful
  • 15. Example: Stress testing and policy options for South-Korea
  • 16. 5. HOW TO MAKE IT HAPPEN From words to action
  • 17. Diagnosis, development, results 0 2 4 6 8 10 O culture O speed O trust O experience S structure S investment S motivation S liquidity S layers P focus P key strategies P environment R comp. layer R redundancy R diversity R mobility Resilience profile Target Country A Country B
  • 18. IF possible in making decisions Chose the option that •Increases portfolio’s diversity •Increases multi-skilled people •Builds in automatic adaptation •Decentralizes operations and decision making •Speeds up reactions •Increases connections to external world Avoid solution that •Ties your resources for long term investments •Is producing/using only experts •Is only maximizing efficiency •Relies on one perception of the future •Increases centralization of systems
  • 19. Thank You! Please contact: ilmola@iisa.ac.at

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