|#1920||689||July 25, 2018||By Subhasis Das|
“War is an area of uncertainty. The first thing here is a fine piercing mind, to feel out the truth with the measure of its judgement.”
Clausewitz, On War
Uncertainty and Risk have similar manifestations but are different entities. An uncertain future is not necessarily a risky future. Uncertainty is a manifestation ofunpredictability and cannot be quantified. It has to be accepted as a reality beyond any means to control. Uncertainty is normally associated with negative outcomes, however positive and neutral outcomes are also possible and should be analysed. Risk on the other hand can be identified and even measured. A risky decision can be taken in the situation of complete certainty, if the leader so desires. Every decision making option is associated with a degree of risk, while uncertainty can affect all options simultaneously. While risk management is a judicious exercise followed across domains, uncertainty is best handled by a method of hedging. The subtle difference between risk and uncertainty can be explained elegantly thorough an example given by Fahad Usmani.
A Real-World Example on Risk and Uncertainty[i]
Let us say there are two well-known football teams consisting of renowned players, and they are going to play a football match the next day.
Can you tell me exactly which team is going to win?
Obviously not. However, you can make an educated guess by reviewing and analyzing the past performance of each individual player, the team, and the results of matches they played against each other. Here you can come up with some number like there is a 40 percent chance of Team A or Team B winning, or there is a possibility of Team A or Team B losing the match by 70 percent. If you bet your money on a team which has a lower chance of winning, you are taking a risk.
Now, let us put the same football match in a different scenario.
Let us say again that two football teams are going to play a game, and no players have been selected for either team.In this situation, if somebody asked you which team is going to win, what would you say?
You’re completely clueless. You don’t know which team consists of which players, and you have no idea how the teams will perform, etc. In this situation, you don’t have any past information, are totally clueless, and hence cannot predict the outcome of the event, even though the match is the same, the rules are the same, and even the stadium is the same.
This situation is called uncertainty.
In an articleon Uncertainty Management, Gilles Hilary INSEAD Professor of Accounting and Control and Paul-Antoine Croize, a former French Army Captain argue that the militaries across the world are better prepared to tackle uncertainty than many other organizations, because of certain institutionalized processes[ii]. While risk management is now a commonly studied and practiced approach, the aspect of uncertainty is often left in the background due to the obvious difficulties. The authors also argue that armies typically operate in two main modes: more of risk management in peace time and more of uncertainty management in wartime. Hence apex level military leaders are required to be managers in peacetime who devote most of their time and energy on risk mitigation and management. In war however, they will be expected to switch from risk management to that of uncertainty management, which a conflict situation is expected to generate. In war the leader who manages uncertainty better, is likely to emerge on the winning side. Uncertainty can be best tackled by intuition while risk could be best handled by analysis.
Militaries are traditionally known to handle uncertainty much better than domains like finance, management and business. One primary reason why militaries handle uncertainties better is the almost fanatic obsession for maintaining reserves at all levels. The second is the reliance on self contained task forces or teams. These are common traits across all militaries and are integral to the structure and planning process. Maintaining of reserves is costly and with cost cutting measures being the order of the day, the luxury is likely to be withdrawn or reduced in days to come. In such a scenario, uncertainty has to be handled at the cognitive level and will be primarily centered on the apex level military leadership. The challenge would be to take decisions of critical importance in a fuzzy zone where external aids and tools will be of minimum utility. While staff and information tools can assist, the onus of handling uncertainty will lie with the military leader. Uncertainty will more often than not concern the strategic level of military leadership, while risk will be the predominant factor at the tactical level.
Hedging against Uncertainty
Defence planning and decision making has a unique challenge, quite unlike business or stock markets. Here the impact of a strategic decision may be felt in timelines completely at variance with the present. However predicting the future and being a ‘soldier oracle’ is not a skill which comes naturally to military personnel. Military personnel thrive in the memory of the past and the reality of the present. One could handle uncertainty by not doing anything at all and treat the situations as they come along. This would however be an inelegant solution. The other more practical way would be a sincere attempt at analyzing the future conundrum and try to cut through the maze. By analyzing the uncertainty systematically, an organization can attempt to convert the unknown unknowns to known unknowns. It can be described as a process of converting uncertainty to a degree of risk. In the financial world, the uncertainty of the market is tackled by a process of hedging. Hedging is a way of broad basing our options so that a loss in one sector is offset by a hopeful gain in a different sector. Hedging would also involve bringing greater number of options on the table, accommodate varied opinions and counter view points. Scenario building is often used in the diplomatic community, the management sector and in certain area of military planning as a method of hedging our bets. Another technique which is gaining increasing relevance in the uncertain times is the aspect of ‘red teaming’ in decision making. The red teams are in house teams of qualified personnel who are tasked to constantly evaluate organizational decisions from the perspective of the enemy or competitor and find holes or deficiencies in the decision. The red teams have been found to be effective in generating the nuances of uncertainty as obtained in the real world.
Risk taking ability of a bold commander has been eulogized through history. The virtues of a well considered and risky decision could well prove triumphant in a war like situation in future. Inspite of the huge enhancement of information available to the present day military leader, an element of uncertainty will always remain. Some would argue that uncertainty would actually increase in a situation of information overload and the ‘fog of war’. Hence the future military leader needs to recognize the dual challenge in decision making. While uncertainty is likely to manifest more during war like situation, the preparation or hedging against uncertainty should be undertaken during peace time. These proactive peace time actions taken towards organizational restructuring, manipulation of the conflict zone, introduction of versatile weapon systems, effective surveillance of the enemy etc., could hedge against the uncertainty of war and enable the success of decisions. Risk on the other hand needs to be seen as a manifestation of the personality of the commander and a battle winning factor. Any attempt at risk mitigation during war could be counterproductive and suppress the decision making ability of a military leader in war. Hence the key issue is the differential handling of the issues of risk and uncertainty in war and peace. The approach has to be distinct and tailored for the circumstances.
[i] Fahad Usmani, Risk vs Uncertainty in Project Management, https://pmstudycircle.com/2012/02/risk-vs-uncertainty/ accessed on 10 Jun 18.
[ii] Eight Ways the Military Manages Uncertainty, https://knowledge.insead.edu/blog/insead-blog/eight-ways-the-military-manages-uncertainty accessed on 10 Jun 2018
Views expressed are of the author and do not necessarily reflect the views of CLAWS or of the Government of India.