Opinions are currently divided on whether COVID 19 is a Black Swan event, White Swan or a Grey Rhino risk
Newspapers like American based Politico reports, “Trump faces ‘black swan’ threat to the economy and re-election.”
The New Yorker puts it this way: “As Coronavirus Spreads, Stocks Fall Again and the White House Frets About a Black Swan.”
Therefore, Is COVID 19 a Black SWAN event, White Swan or a Grey Rhino? We have looked into the meaning of Black and White Swan.
Why GREY RHINO?
Unlike Black Swan which is very rare to find, a grey rhino is also an animal but it is so commonplace that you can’t even ignore unless and except you choose to. In reality, you can’t even ignore a rhino, due to its very huge stature. When a rhino appears to you, or rather comes your way, you cannot really remain the same. Therefore, in risk management, when a threat is  so obvious, historically proven and has such a high likelihood to occur, risk experts speak of a grey rhino. As there are not too many non-grey rhinos, a grey one is something you obviously should expect. The American political scientist Michele Wucker was the first to postulate the idea in 2013. Grey rhino risks have in common, a high damage potential, are extremely likely to occur and they are, nevertheless, consistently ignored.
[Also read] ERM LESSONS FROM THE CORONAVIRUS PANDEMIC
A grey rhino is therefore a “highly probable, high impact (HH on the risk matrix) yet neglected threat. Grey rhinos are not random surprises, but occur after a series of warnings and visible evidence.
According to the US author who popularised the term, Michele Wucker, It is a metaphor designed to help us to pay fresh attention to what’s obvious and ideally to create the kind of emotional connection that people had with Taleb’s black swan. The black swan did a great job in getting people to realize that they couldn’t predict everything but it has been misused and people have used it as a cop-out; ‘Oh, nobody saw it coming!
Even the world leaders are not exempted from this attempt to excuse many things that caught them unawares in this fashion, claiming nobody could have imagined this happening; this thing just happened suddenly etc. For instance, there are many countries that are prone to the occurrence of wildfires, but when it happens the concerned authorities would sometimes still try to find ways of repudiating responsibilities on providing solutions by simply wishing it away or expressing its suddenness as if it was happening for the first time
The gray rhino is more dynamic. It’s a metaphor for missing the big, obvious thing that’s coming at you. And the important part is that it gives you a choice. Either you get trampled or you get out of the way, or you hop on the back of the rhino and use the crisis as an opportunity.
Another writer, James Pethokoukis of the American Enterprise Institute, has also described the coronavirus, as a bad fit for Taleb’s definition. According to him, Yes, COVID 19 is carrying an extreme impact, in terms of human lives, dislocation, and economic losses. But is the emergence of such a dangerous virus really an unpredictable outlier that suddenly swooped in from outside our “regular expectations?”
As the debate ranges on, the progenitor, and author of, ‘Black Swan; the IMPACT of the highly improbable’, has finally taken a position to clear the doubts as to where COVID 19 belongs. He stated, in a recent interview with Bloomberg, that the coronavirus pandemic was predictable, so it cannot be put on a par with the September 11 attacks and be considered as a “black swan.”
Taleb said: “I am so irritated that people would say it is a ‘black swan’.” The real “black swan,” is the event of September 11th. The coronavirus pandemic was predictable, which means it is a “white swan.
Therefore the first lesson to learn from COVID 19 is that the pandemic is definitely not a BLACK SWAN Rather, it is better considered a WHITE SWAN according to Professor Taleb, or a GREY RHINO according to Michele Wucker. The main reason for this classification is that the pandemic was predictable, the likes of it having happened several times in t h e p a s t , g l o b a l l y , a s a l r e a d y h i g h l i g h t e d a b o v e. Therefore as an organization, business establishment, government or NGOs, how do you identify the SWANs (black or white) that have the tendencies to affect your enterprise, and how should you prepare for it?
But most importantly, Why do leaders and decision makers keep failing to address obvious dangers before they spiral out of control? For instance;
Could anyone have predicted when exactly the next pandemic (COVID 19) would hit? No. But there have been many warnings that it was only a matter of time for this or any pandemic and that the world was not ready.
In our various businesses and institutions, what attention do we pay to research and development?
Back in those days, in the financial sector for that matter, nearly all banks had well-funded research and development departments. R & D was highly rated as a tool for competition. Ditto with the manufacturing industries and many other players in the Non-Financial sector. Its almost a ’’sin’’ for a quoted company then, not to have well-structured R & D department. What is the situation NOW? According to Newton’s Third Law of Motion published in 1687. “For every action, there is an equal and opposite reaction. What’s being sown globally in the area of R & D, and what does the world expect to reap? To be continued
AERMP is the foremost professional body for risk management practice in Nigeria. We are an independent, not-for-profit institute, duly registered and approved by the Federal Government of Nigeria (under the Company and Allied Matters Act 1990) to set professional standards in enterprise risk management practice among the practitioners in all industries and sectors (both private and public). For more information: https://aermp.org/
