The black swan – a high-impact and hard-to-predict scenario

Black Swan - a hard to predict high impact scenario like Brexit

The Black Swan examines the influence of highly improbable and unpredictable events that have a massive impact

The black swan event is a high-impact, hard-to-predict and rare event that is beyond the realm of normal expectations in history, science, finance and technology. A Black Swan  Scenario examines the influence of highly improbable and unpredictable events that have a massive impact. However, with change comes opportunity: – think Brexit. For the majority, the possibility the UK might leave the European Union is a major source of concern. The truth is, that with any change comes the opportunity for new business models. 

Key Considerations

In a business context, the nature of a black swan is that it represents an event or combination of events that impact the business in a significant manner. Since no one can predict the future, how do we gain an understanding of what we don’t know? One approach is to use the most critical assumptions underlying the strategy as a context for understanding how much a black swan might hurt.

The approach works as follows:

1.Define strategic assumptions. In effect, strategic assumptions are your ‘white swans’ because they reflect your view of the environment in which the enterprise will operate during the planning horizon.

2.Develop contrarian statements. These statements negate the strategic assumptions. If the assumptions are management’s ‘white swans,’ the related contrarian statements are potential ‘black swans.’ They frame the impact that could seriously damage the company’s ability to execute its strategy. Recognize that not all contrarian statements are black swans. Look for the statements that are likely to have the greatest impact on the company if they were to transpire. They should reflect situations that would likely arise from events about which the organization currently lacks sufficient information and that management would likely rationalize after the fact as: “Why didn’t we see it coming?”