What is a Black Swan?
A black swan event, a phrase that you might not hear off very often because it’s an extremely negative event or occurrence that is impossibly difficult to predict. In other words, black swan events are events that are unexpected and unknowable. The term was popularized by former Wall Street trader Nassim Nicholas Taleb, who wrote about the concept in his 2001 book Fooled by Randomness.
- An extremely rare event with severe consequences. It cannot be predicted beforehand, though many claim it should be predictable after the fact.
- Can cause catastrophic damage to an economy, and because they cannot be predicted, can only be prepared for by building robust systems.
- Reliance on standard forecasting tools can both fail to predict and potentially increase vulnerability to black swans by propagating risk and offering false security.
Examples of a BS event
Brexit could be classified as a black swan event .
- Attacks on the twin towers on Sept 11th, 2001
- The Wall Street Crash of 1929
On a smaller scale a black swan can apply in business and to avoid mini black swans the procurement professional should look make a risk register with potential risk including events that are highly unlikely to happen but possible.
Procurement professionals might have their own black swan moment when faced with a supply chain disruption caused by natural disasters or force majeure
A cyber attack might bring trading offline and cause lost of crucial IT infrastructure and if not dealt with promptly cause major disruption and loss of reputation
If an organisation becomes irrelevant and loses its position in the market place this is not a BS event, because slow erosion could be foreseeable and is more likely to be attributed to poor management than a sudden catastrophic event that changes the course of trajectory in an instant.
