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Managers Of Uncertainty

April 21, 2010

It is now almost three years since IACCM urged its members to start thinking of themselves as ‘managers of uncertainty’. The point being made was that a globalized economy and a steady shift towards greater inter-dependency was making traaditional approaches to risk management inadequate and potentially inappropriate.

Recent events continue to illustrate this point – most notably the disruption that resulted from the volcanic eruptions in Iceland.  Traditional risk registers would have been very unlikely to predict such an event and planning for it would have been considered highly inefficient.

The Economist has published an excellent article that reinforces this point. In discussing the future of risk management, it comments: “The aim is less about trying to predict what unlikely events may come along, and more about creating mechanisms and relationships that would help the firm and its partners respond with agility if disaster did strike. Such exercises, when done well, help their participants to develop a capacity to devise quick, creative solutions to unexpected problems, and to build trust among those who would have to take crucial decisions on the spot and those who would have to follow them.”

Once again, the point here is that business today needs to spend less time building rules and pushing risks onto other parties, and far more in creating collaborative networks and superior communications (but don’t forget to plan a fall-back in case it is those communication networks that fail!) Instinctively, many contracts and commercial professionals know that this is the smart way to go. Yet far too many contracting processes remain rigid and focused on the same adversarial terms and conditions.

Today, IACCM published the results of its annual survey of the Top Ten Negotiated Terms. Once more, it reflected virtually no change in the dominant issues – none of which are about forming collaborative networks. The contract remains fixated on trying to create certainties in a world where increasingly uncertainty reigns. We know that The Economist is right when it says we should be “creating mechanisms and relationships that would help the firm and its partners respond with agility” – so what are we doing about it?

Certainly some IACCM member companies are taking rapid steps to deal with uncertainty – and Contracts and Procurement groups are occasionally showing leadership in this work. Our recent survey on ‘commercial agility’ generated a large input and revealed a strong understanding that things must change – but also indicated that most are still playing at the edges, rather than addressing the core challenges.

I will write further on this topic when the Commercial Agility report is issued next week. But meantime, have you been taking steps that will help you deal with future uncertainty better than your competitors?

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