Unleash Adhocracy to Face Emerging Risks

Brainstorming is one of the most commonly applied expressions of adhocracy. It brings the right people together to focus on one or more issues of mutual interest. While these activities may be carried out through a formal management risk (or other “ad hoc”) committee, they may also be spontaneous, unplanned knowledge-sharing sessions to ascertain whether changes have occurred internally or externally that warrant closer attention. Brainstorming may focus on identifying extreme but plausible scenarios, such as a pandemic similar to COVID-19, a precipitous economic decline, an unexpected spike in interest rates or signals of impending change in the regulatory climate in key markets.

While emerging risks may be identified through established committees, monitoring processes, and forward-looking key risk indicators, a constantly changing business environment necessitates shaking things up to encourage people to think out of the box to avoid being constrained by rules and conventions.

In 2018, NACD issued a report on board oversight of disruptive risks and the importance of adaptive governance as a framework for overseeing such risks. Management should assess the velocity and persistence of significant risk events and the organization’s response readiness.

Ad hoc sessions should carefully consider possible disruptive risk events that are high impact, high velocity and high persistence so that focused efforts are undertaken to develop and improve response plans. Apart from the so-called “black swans” — the risks that no one sees coming — these “gray rhinos” can be just as threatening if they are disregarded until it is too late.