Article: What’s up with risk, uncertainty, ignorance and myopia?

Today, we published a paper in Industrial Marketing Management, one of the top business journals (we are almost impressed by ourselves). IMM focusses on business-to-business relationships.

We were invited to illuminate the diversity of approaches that hides behind the term "risk management". In the paper, we discuss four concepts and highlight their academic and practical relevance for business management: Risk, uncertainty, ignorance, and myopia.

You can find the full paper, available open access, at: https://www.sciencedirect.com/science/article/pii/S0019850120304028

Abstract

Rare events are common: Even though any particular type of ‘rare event’ - a world war, global economic collapse, or pandemic for that matter - should only occur once every 100 years, there are enough of those types of ‘rare events’ that overall, they commonly occur about once every 10 years. As we are currently experiencing with the COVID-19 pandemic, we do not sufficiently leverage the rich toolset that risk management offers to prepare for and mitigate the resulting uncertainty. This article highlights four aspects of risk management, and their practical and theorical implications. They are: 1) Risk (in the narrower sense), where possible future outcomes can be captured through probability distributions. 2) A situation of uncertainty, where there is transparency regarding what is not known, but probability distributions are unknown, as well as causal relationships influencing the outcome in question. 3) A situation of ignorance, where there is no understanding that certain possible future developments are even relevant. And finally: 4) The emergence of organizational and inter-organizational myopia as an effect of risk, uncertainty and ignorance on collective human behaviour.