Black Swan Events & Scenario Planning Essay

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planning is a method by which organizations can look at potential future situations and use this knowledge to improve the organization's ability to respond. Scenarios are created that test the managers to see what their strategies might be, and how they will respond. The value of scenario planning is that it can reveal blind spots in thinking, and can help managers to recognize situations before they occur, in the future, having already seen similar things during the scenario planning (NetMBA, 2010). For a business, the scenario might be anecdotal, it could be based on worst case possibilities or it can involve a combination of different scenarios.

Scenario planning can be of critical importance to organizations because it can allow for organizations to think about different types of future scenarios. Often, organizations plan for the future mainly be assuming that trends today are going to be continued in the future. Plans are not usually made for the prospect of dramatic changes in the external environment. As an example, a company may not plan for a disruptive new technology. But such technologies do occur once in a while, so in most industries it is worth running through such a scenario to see how the organization would respond. There is value in getting a sense of how the organization would handle such a scenario, and whether its capabilities in that situation are adequate. Weaknesses and vulnerabilities can be identified under scenario planning.

Scenario planning is different from other methodologies in a few key ways. First, it is not based on past events, or projections of current situations. It is based on fictional scenarios, so it does not have direct practical relevance; rather, it is a thought exercise. In that sense, it is quite different, and that is where the value lies. The value is that this technique is unique, and it gets the managers thinking in ways that they would not normally think. If the scenarios are unique, but realistic, they can be quite powerful in terms of getting the managers in the organization to examine how they think, and how they react to different situations.

Phase 5, Discussion Board 2

Scenario planning has its roots in the military, where it has been used for example to imagine a thermonuclear war. Such a situation had never occurred, so there was no basis to learn about how to deal with that type of situation, at least not based on historical precedence. But it was felt that it was necessary to try to think about what such a scenario would entail, in order to improve preparedness (NetMBA, 2010).

The concept of scenario planning was then adapted for business in the 1960s and 70s by Pierre Wack, who worked on scenario planning for Royal Dutch Shell (NetMBA, 2010). Although the oil business was fairly stable at the time, there was a massive oil shock in 1973 that created a crisis in the industry (and in society at large). Shell had already run a scenario plan on this situation, so it was able to move quickly to stabilize the company. As a result, Shell performed better than expected during the time of crisis, and the concept of scenario planning had proven to be successful, and became more widely-used.

The managers are usually brought into a single location for scenario planning, though today it could probably be done remotely. The scenario is presented. There are specific parameters, in terms of organizational capabilities, the time frame for the scenario and that sort of thing. The scenario is then run, and the managers do what they feel they need to. Afterwards, the scenario is reviewed so that the outcomes can be discussed. This is an important part of the process, because lessons need to be learned in order for the scenario planning to be useful.

Usually, within a corporation, scenario planning is something run by consultants, outside people who specialize in scenario planning. This works better, as there is not usually any department or individual in charge. The consultant would be brought in by senior management members, in order to run the scenario.

Phase 5, Discussion Board 3

A black swan event is something that is highly improbable. The point of this concept is that sometimes highly improbably things do occur, and they tend to change situations for people, companies and countries considerably. The 9/11 terrorist attacks are an example of a black swan event (Bloch, 2015). Another example of a black swan event would be the oil crisis in the early 70s. This was sparked when Egypt and Syria launched a surprise attack against Israel, and the U.S.

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responded by supplying Israel with the weapons needed to defend itself. OPEC then launched an embargo against several major Western nations in retaliation. While conflict in the Middle East is hardly unpredictable, this conflict came about suddenly, and OPEC's market response to a political problem came out of left field as well.

One of the most important traits of black swan events is that they are not predictable. Scientifically, the odds of such events would be so low as to be rejected or ignored. Thus, black swan events fall outside of the realm of traditional statistical analysis.

By definition, black swan events cannot be more likely to today than in the past. A black swan event is unlikely by its very definition. Events that are more likely today might be big events, negative events, big negative events…but they are not black swan events. What was a black swan event 20 years ago would not necessarily be a black swan event today. A black swan event is unlikely, with a miniscule statistical probability, so small that the event's likelihood would typically be ignored. That does not change over time, so a black swan event cannot be more likely or less likely today than it was twenty years ago.

MGMT 863 Phase 5 Discussion Board

Clapp (2005) fits into the Hypothesis 4. The MIT interdisciplinary study fits into the introduction -- it is an overview of a few different issues pertaining to nuclear power. The NEI website page discusses some issues that were making the rounds, but were ultimately unwarranted on the basis of scientific evidence. This page may or may not prove useful. The McPheeters (1984) and Fenster (1984) papers are old, but touch on a safety issue. These papers is mostly useful if that issue is part of the ongoing issues. The IAEA papers on the Netherlands (2009) and UK (2011) provide a good overview of the technical issues, maybe more useful during the introductory phases of the paper, which is the first section of the lit review. The Nicholson (2010) paper fits in with the discussion about nuclear energy and climate change.

Phase 5, Discussion Board 2

The literature review can be structured in a few different ways. It can be based around the research questions -- I have four hypotheses. This is the approach that I plan to take. There will be some basic, background-level research that is presented initially. But the paper is going to be a synthesis of four different subjects, and each one will have its own unique pockets of literature. There is actually very little overlap between the different threads -- that it what I will weave. So the best way to present the literature review, so that it can be understood by the audience, is to structure it based around the four hypotheses/research questions.

The theoretical perspective is basically a management perspective. Nuclear power is a global issue, and it is one that requires some global thinking. There are a few other valid perspectives -- the scientific and the political -- but these are not really the best such perspectives. The data collection will be based on the research. The study is a meta-analysis that will seek to answer the questions using information that has been previously published. It is possible that one or more questions might not be answerable, but in such a situation would at least allow for further gaps to be identified.

Data analysis is a bit trickier. I want to see what the data is. The paper will probably be qualitative in nature, but there is the possibility that quantitative work can be done here. At this point, however, this has been tougher to pin down, for the lack of hard numbers on the research question. I do not have the sort of budget that would allow me to do my own primary research on global nuclear power. There are no ethical issues here. There's not an ethical dilemma hiding around every corner!

Phase 5, Discussion Board 3

Chapter 2 should cover all of the relevant literature to the subject. In this case, there are four hypotheses, each relating to a specific area of the research question. Each will come with its own set of literature. There unfortunately is not a lot of literature that ties together these multiple issues, so each one will have to be addressed….....

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