It’s interesting to observe that health officials have substantially lowered their earlier estimates of the number of people who might die this winter from swine flu. Why were the earlier predictions so far out?

I’m no expert on this subject area, but I suspect that a major contributory factor was the natural tendency for people to exaggerate spectacular risks, especially those outside their control with a high media profile. We saw it ten years ago with the Y2K bug, which prompted dire forecasts from seasoned IT professionals and government officials. One leading US government authority described it as “the electronic equivalent of the El Niño”. But they were completely wrong.

The problem is that many people instinctively translate large vulnerabilities into inevitable disasters, generally overlooking the preventative and remedial measures that are already in place, or might be prompted by the publicity. High threat scenarios also bring out an evangelistic streak in even the most hard-nosed professionals. And this doomsday bandwagon is reinforced by political pressure to be overcautious in order to avoid any subsequent criticism for lack of preparation.

Of course there’s nothing wrong with a degree of prudent overreaction to a big-ticket risk, as long as it’s kept in context. Gambling a small amount of your budget on an outside possibility is fine, as long as you can afford to write off the loss. But business cases simply do not stack up for major expenditure on low probability scenarios. Earlier government pandemic forecasts suggested that a pandemic was likely in the next ten years, but the timing and size could not be predicted. There’s no way you can justify any major business change on such a vague assessment.

Nassim Nicholas Taleb, the author of The Black Swan, promotes the idea that we should devote a small amount of time and money on planning for spectacular, game-changing events such as 9/11 or the credit crunch. Such risks are not addressed by conventional processes such as risk management or business continuity planning, because they’re unthinkable and generally off the scale, though the implications can be explored through an imaginative crisis exercise.  

Even when an event is imminent and unavoidable it’s important to keep the damage in perspective. It’s not logical or sensible to plan on the basis that an event with a wide spectrum of potential impacts will create the maximum possible damage next time it hits. Now I'm not suggesting that we should ignore the worst case impact. We should of course take sensible steps to prepare ourselves as best as possible. Crisis exercises, for example, are a useful vehicle for creating awareness and better understanding the key implications, issues and requirements associated with a worst case scenario. But we should avoid mixing too much fantasy with reality, because worst case forecasts create panic, generate unnecessary expenditure and cry wolf.

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