The Rapid Response Institute

Tag: geopolitical risk

  • At the Precipice?

    At the Precipice?

    On October 8, 2021, we posted the blog, Welcome to the 70s–Again!  The point that the awful economy of that decade could return.  It seems that one year later, those comments have come true.  Many are now freely comparing out contemporary time to that period before most adults were born.  This Baby Boomer graduated from college in 1970s and ‘enjoyed’ the full economic Stagflation experience and it was not pretty and definitely not fun.

    However, increasing global events, especially from Europe and Asia beg the question, Are we entering the 1930s again?  Seeming sinister forces both internal to the United States and global are conspiring to wreck havoc if we are not careful.  Even the word, World War  III is being ‘loosely’ tossed about by various journalists and pundits.

    On top of all these daily headlines, we are told the planet is in peril.  However, the trillions and trillions of dollars necessary do to seem to be available.  “Damned if I do, damned if I don’t.”

    What to Do?

    Geopolitical Risk is not a new concept.  Organizations have been dealing with it for many millenniums.  As always, the race goes to the best economic players.  Agile, Smart, and Decisive continue to play a big role in the success of organization live and even thrive in hard times.

    R B C

    We have long been advocates of the Relationship(s), Behavior(s), Condition(s) model first put forth to research International Negotiations by Stephen Weiss in 1993.  It is a good construct to assess behavioral changes based on situational (conditions) changes, even transformation.  Which results in changes in relationships including adding new and dropping existing.

    Interested readers can search this website, there are 14 blogs on this subject in our Critical Mass series.

    Pressure Cooker

    No one can predict the future but it is abundantly clear there a  lot of pressures on business and people in general.  This writer is not as sure that new behavioral tools are as necessary as good old fashion Leadership!  For executives, the adage, “Lead, Follow or Get Out of the Way” is applicable today as it ever was. 

    Finally, with so many mounting and rapidly changing Conditions, a constant review and assessment is in order.  For example, in the last period of great inflation, successful companies conducted ongoing review of their pricing and cost structures.

    How are You Leading Your Team/Organization/Family in these Trying Times?

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    Please note, RRI does not endorse or advocate the links to any third-party materials herein.  They are provided for education and entertainment only.

    The author’s credentials in this field are available on his LinkedIn page.

    “People fail to get along because they fear each other; they fear each other because they don’t know each other; they don’t know each other because they have not communicated with each other.” (Martin Luther King speech at Cornell College, 1962).  For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game.  You can contact this author as well.

    For more insight regarding the economics of Climate Change, check out our recent blog, Crippling Green.

    For those start-up firms addressing energy (including renewables) challenges, the author is a member of Global Energy Mentors which provide no-cost mentoring services from energy experts.  If interested, check it out and give us a shout. 

  • So Here We Go Again?

    So Here We Go Again?

    Will gas lines return?

    Recent geopolitical events have driven the price of gasoline sky high–again!  As of this writing it is difficult to say where this will all lead.  What is known is that the cost of all things related to petroleum have significantly increased and may go even higher.

    According to the U.S. Department of Energy, in addition to transportation and heating, oil and gas are used in over 6,000 everyday products.  In other words, their use is pervasive in all societies and economies.

    As a response to the oil shock of 1973, in 1975 the Energy Policy and Conservation Act (EPCA) developed the Strategic Petroleum Reserve (SPR).  According to the DOE, as of December 2021 the current inventory was approximately 600 million barrels of crude oil.  It is designed to be a buffer or in digital terms a cache in case of disruption or other requirements.

    Furthermore, according to the U.S. Energy Information Administration (EIA), in 2021 the US consumed approximately 20 million barrels of oil per day.  Assuming Russia exports 8% or approximately 1.6 million barrels (including refined products) per day to the US, this shortfall can be replaced with SDR withdraws as well as increases from both domestic producers and other exporters.

    What Do We Do Now?

    Oil and Gas are commodities and are therefore subject to the same Supply and Demand processes inherent to that segment.  Other examples include, gold, cattle, pork bellies and orange juice, etc.

    Today’s global markets perceive that the demand for gasoline is higher than the available supply.  Therefore, sellers can command higher prices.

    The apparent supply can be brought into balance with demand in two fundamental ways.  First, and easiest is to cut back on consumption, i.e., work from home, carpool, mass transit, etc.

    Second, which will take some time is for domestic production to increase.  ‘Small’ increases from trading partners and domestic operators (along with government regulatory assistance) will add up as well.

    One of the worst things that can happen is hording.  Think back to the great Toilet Paper hording in the early days of Covid-19.  It was unlikely that the daily demand for bathroom tissue suddenly increased.

    In effect, households ‘held’ the inventory (instead of stores) until it was worked down.  Manufacturers did not increase production albeit retailers began to ration individual purchases.

    The gas lines of the 1970s were also an example of hording.  Once the Odd and Even license plate model went into effect, they dissipated almost immediately.

    We need NOT go through this experience again!  We all have the tools necessary to change that narrative and not relive history.

    Dealing With the Issue

    For almost two decades we have modeled large scale economic procurement initiatives, both in the public and private sectors.  Attempts to attain 25% or more in value from initiatives are almost always destined to fail.  On the other hand, finding small components of economic value across a number of processes and departments can easily exceed pronouncements of singular, overall great value to be obtained.

    For example if several areas each find 2-5% of value opportunities, 25% can be quickly exceeded.  This works for large and small organizations.  It can work for individual households too.  One need not find the Silver Bullet or make Herculean efforts to overcome difficult challenges.

    Where Can You Find Eight One-Percent Opportunities to Decrease Your Petroleum Footprint?

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    Please note, RRI does not endorse or advocate the links to any third-party materials.  They are provided for education and entertainment only.

    Photo Source: NPR

    For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game.  You can contact this author as well.

     

  • Beware The Guns of March?

    Beware The Guns of March?

    Readers know that as of this writing there is geopolitical and military tension in eastern Europe.  Hopefully, the situation will resolve peacefully.

    This piece is not about those politics.  Rather it is about the potential for accidental engagement and how that risk can be mitigated.

    President Kennedy is famously cited for the comment that referred to the origin of the War to End All Wars, “Perhaps the greatest contribution historians have made to humanity, at least as historians sometimes tell it, came during the Cuban Missile Crisis when Barbara Tuchman’s book, The Guns of August, saved the world from nuclear war.  The book is Tuchman’s narrative of the origins of the First World War, an account that, in President John F. Kennedy’s reading, showed how miscalculation and inflexible military planning could force great powers into catastrophic conflicts against their leaders’ wishes.”  We might add, against the wishes of the populations that must endure the unbearable cost of stupid interventions.  As noted by Herbert Hoover.

    “Older men declare war. But it is the youth that must fight and die.”

    While the Cuban Missile Crisis worked out well for both parties, including the world in general, it was not necessarily a given.  Miscalculations such as the US lack of knowledge regarding nuclear weapons onboard Soviet submarines or the ‘launch’ upon the invasion of the island of Cuba order could have been disastrous.

    Misunderstanding during the 1983 military exercise Able Archer is another example of a near nuclear catastrophe.  And then there all the Broken Arrows,  nuclear weapon incidents (that we know of).

    Complex Systems’ Behaviors

    This blog series has commented on complex interconnected systems a number of times.  The  Risk Profile is dramatically increased in such systems.  Geopolitical and military systems must be viewed through this lens as well.  However, we know complex systems can be properly managed and thus reduce the likelihood of major global impact events.

    This process is grounded in High Reliability Management (HRM).  Wikipedia defines, “A high reliability organization (HRO) is an organization that has succeeded in avoiding catastrophes in an environment where normal accidents can be expected due to risk factors and complexity.

    This author believes that geopolitical and military complex systems can benefit from this model.  Given that the cost of these type failures is incalculable they certainty fits HRM profile.

    Folly Revisited

    In the 1930s Brinksmanship did not end well.  Following historical patterns, especially from World War I, Europe plunged into the abyss for the second time in two decades.  Miscalculations on the side of multiple parties in both conflicts let to unthinkable destruction and loss of life.

    Today’s militaries are much more powerful than ever.  Hopefully, from Shakespeare, “Beware the ides of March” does not portend this year.

    Geopolitical miscalculations, brinksmanship and other aggressive negotiations can go badly.  This is especially the case when adversaries are not in direct and frequent communication with all parties.

    Even then cultural differences put discussions at risk.  Temperance, communication and though is what saves the world from the unthinkable.  Hopefully, cooler heads will continue to prevail during the current crisis.

    Cross Cultural Negotiation

    The importance of cross cultural understanding cannot be overstated as geopolitics and businesses deal with complex, multi-faceted issues across many nations, ethnicities and cultures.  Old international negotiation models are no longer relevant.

    Behavioral Economics is foremost today.  All parties dealt with are by definition diverse.  They are composed of different genders, ethnicities and ages etc.  This is a more accurate model that reflects the reality of organizations today.

    Also, keep in mind that no nation is homogeneous.  Each is composed of separate regions, cities, with local backgrounds, cultures and more.  So when one talks about two or more geopolitical entities to be at odds over an issue(s), that model is too simplistic and can lead to greater risks as described earlier.

    These are more contributing factors for misunderstanding and miscalculation.  Most of us never ‘step in the other’s shoes.’  However, we can recognize the differences in perspectives, behavior and cultures.

    Changing the Playing Field

    We have often discussed the Relationships, Behaviors and Conditions (RBC) construct among economic actors.  The model argues that new Conditions or Situations and Behaviors change the Relationship among parties.  This applies at all levels of human interactions from two individuals to many nations.  It is applicable here as knowledge to help diffuse difficult situations.  For an in-depth review of the model, check the linked blog.

    No Guns this Time?

    The cascading events following the assassination of the Austrian, Archduke Franz Ferdinand by a small terrorist group is widely believed to have led to the beginning of World War I.  The sceptic must put forth, “you have got to be kidding me.”  Yet, it did happen.

    Our point here is that it does not take much to launch the horrible.  How many American doughboys died for that nonsense?  It can happen again and most likely will at some point given human nature.

    Business Contingency

    Geopolitical risk has always been one component of an organization’s risk profile.  What will be the impact on your business if the unthinkable happens in Europe again?  Other risk mitigation tools include social media.

    In 2013 we published ” Mitigating Operational Risk Using the Power of Social Media” that identified a methodology to better understand the beliefs and behaviors of local populations.  From the footnoted piece, “Large global enterprises can augment existing security and risk management with the same solutions used by the government entities in the defense sector at commercial price points.  The real question is not why, but why not?”

    Since that time, there have been significant advances in these capabilities.  Other readily available tools can assist as well.  Use inexpensive technology to protect global stakeholder interests.

    How Robust is Your Firm’s Contingency Plans for Geopolitical Uncertainties?

    For More Information

    Please note, RRI does not endorse or advocate the links to any third-party materials.  They are provided for education and entertainment only.

    For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game.  You can contact this author as well.

    Footnote

    Kuiper, Marcus A. and Shemwell, Scott M. (2013, February). Mitigating Operational Risk Using the Power of Social Media. Petroleum Africa Magazine. pp. 28-31.