Maldives, black swans and the unknown
It hit us one morning and within hours left 83 dead, scores homeless and a crippled economy in its wake. Though we’ve made a full recovery since the Indian Ocean tsunami of 2004, there is one lesson we have perhaps yet to learn. That is what risk professionals call the effect of the “black swan” and how to insulate ourselves from it.
A black swan is an event that is difficult to predict, has high impact and usually in hindsight appears almost inevitable. The 9/11 attacks, the London bombings and the Indian Ocean tsunami are all black swans.
The question is, given the difficulty in predicting these events and the impact they make, often changing the course of history, how do we attempt to better insulate ourselves against these events in terms of policy?
Since there is no effective way to avoid black swans, policy makers can only prepare to better manage them. This can be done by having robust redundancy and standby systems, creating emergency systems and a stringent tightening of procedures.
The next question is, how ready are we for a black swan event? Can the Maldives effectively manage another tsunami, any other kind of natural disaster or even a terrorist attack? We fear not and we feel it is incumbent upon ourselves to demand a higher degree of vigilance and preparedness from our policy makers.
