Black Swans, Business Rules, and Strategy: What Every Business Analyst Needs to Know
We preach (and practice) strategy as a key element of business analysis. A key element of strategy is identifying significant business risks. We address such risks in the deliverable we call a Policy Charter. See http://www.brcommunity.com/BBSGlossary.pdf (page 39). Appropriate business policies are developed to protect the company.
Sometimes we hear the argument that it’s impossible to determine the risk of some future unknown event. And what’s a rational definition of risk anyway?
By “risk” we simply mean what the dictionary (Merriam-Webster Unabridged) means: 1: the possibility of loss, injury, disadvantage, or destruction : CONTINGENCY, DANGER, PERIL, THREAT
Yes, the following statement is correct: “It is impossible to determine the risk of some future unknown event.” The operative word in that is unknown. How could anyone argue with that?
The implicit reference is to black swans … unpredictable outliers. The only thing business analysts can do to help protect the business against black swans is “… build robustness to negative ones that occur and being able to exploit positive ones.” (Wikipedia on Taleb’s book The Black Swan: The Impact of the Highly Improbable).
I maintain that business solutions based on business rules do exactly that. To respond successfully to unforeseen circumstances you must know what your business practices (business rules) are in the first place(!).
On the other hand, business people generally do have a good understanding of known business risks. We think it’s crucial to factor that understanding into business analysis. Now who could argue with that?!
Tags: black swans, business analysis, business risks, business strategy, Policy Charter, risks, strategy, Taleb
Ronald G. Ross
Ron Ross, Principal and Co-Founder of Business Rules Solutions, LLC, is internationally acknowledged as the “father of business rules.” Recognizing early on the importance of independently managed business rules for business operations and architecture, he has pioneered innovative techniques and standards since the mid-1980s. He wrote the industry’s first book on business rules in 1994.