“The more we study the major problems of our time, the more we come to realize that they cannot be understood in isolation. They are systemic problems, which means that they are interconnected and interdependent.”Capra’s point is that biological ecosystems are complex and interconnected and require a holistic understanding of the intricacy in interrelationship as an integrated whole rather than a dissociated collection of parts. Change in one segment of an ecosystem has cascading effects and impacts to the entire ecosystem. This is also true in risk management. What further complicates this is the exponential effect of risk on the organization. Business operates in a world of chaos. Applying chaos theory to business is like the ‘butterfly effect’ in which the simple flutter of a butterfly’s wings creates tiny changes in the atmosphere that could ultimately impact the development and path of a hurricane. A small event cascades, develops, and influences what ends up being a significant issue. Dissociated data, systems, and processes leaves the organization with fragments of truth that fail to see the big picture of performance, risk, and compliance across the enterprise and how it supports the organization’s strategy and objectives. The organization needs to have holistic visibility and situational awareness into risk relationships across the enterprise. Complexity of business and intricacy and interconnectedness of risk data requires that the organization implement a risk management strategy.
The physicist, Fritjof Capra, made an insightful observation on living organisms and ecosystems that also rings true when applied to risk management: