The persistent Covid-19 pandemic, the ongoing war in Ukraine, the rising inflation precipitated mainly by the uncertainties in the energy market, and even such mundane problems such as endless check-in queues at the airport show: we are living in a time of high global uncertainty characterized by complex risk constellations.
To identify opportunities and risks at an early stage and take appropriate measures, it is a matter of course for Evonik to operate a comprehensive risk management system. To further improve this system, my team and I were asked to support the extreme risks identification in order to add unlikely but extreme risks to our risk landscape.
Our chosen methodology is known as “Wild Cards”, a foresight process designed to identify, describe, and explore future extreme risks. Wild Cards are unexpected events extending far into the future with a negligible probability of occurrence, but the occurrence of which could result in extreme and large-scale changes. It is also true that the probability of a single Wild Card is extremely low. However, over time, the number of Wild Cards increases rapidly, while the chance that no Wild Card will occur approaches zero. This means, long-term, our history will be shaped by Wild Cards after all.
That is why today, the method of using Wild Cards for advanced risk perception is used ever more widely in the fields of risk assessment and management. This is especially true for the reinsurance sector but most other industries, e.g., the chemical industry, as well as governing bodies such as Singapore, or the European Union also use it.
A Wild Cards History
The first to apply the method of including Wild Cards into the strategic planning processes was Pierre Wack. Better known as the father of the explorative scenario method he is one of the founders of corporate foresight. The French oil executive was the head of the Royal Dutch/Shell scenario team that has quite an impressive track record: They warned Shell in advance about the 1973 energy crisis, the collapse of the oil market in 1986, the fall of the Soviet Union, as well as of the rise of Islamic radicalism. While Wack did not coin the term Wild Cards – he called them “rapids” – he was the first who integrated such unlikely but extreme disruptions into his scenario planning processes.
The term “Wild Cards” was first mentioned and defined in the publication “Wild Cards: A Multinational Perspective” in 1992. The book was a joint publication of the future research institutions BIPE Conseil in France, the Copenhagen Institute for Futures Studies in Denmark, and the Institute for the Future in the United States. The authors define a Wild Card as “a future development or event with a relatively low probability of occurrence but a likely high impact on the conduct of business”. They further developed a first collection of Wild Cards. However, they did not explain the methodology of their creation. The credit for this goes to John Petersen who provided the first comprehensive description of the Wild Card methodology in his book “Out of the Blue: How to Anticipate Big Future Surprises”.
In Germany, the well-know foresighters Angela and Karlheinz Steinmüller further refined Petersens methodology and published their approach to Wild Cards in the book “Wild Cards-Wenn das Unwahrscheinliche eintritt” in 2003. Therein, Karlheinz Steinmüller argues that over the time of history the world becomes increasingly interconnect and, that, the area of impact of a single Wild Card increases. Therefore, it is clear that the study of Wild Cards, as well as possible preparation for and prevention of them is becoming more important with the passing of time.
Let’s Share the Unexpected
Building on the methodology developed by Petersons and the Steinmüllers, my team and I conducted a joint project with colleagues from Evonik Group Controlling with the aim to increase Evonik's resilience to such extreme risks and therefore include Wild Cards in risk analysis and increase Evonik’s risk awareness by “thinking ahead”. In total, we identified 95 Wild Cards.
Now, me and Creavis want to share these thoughts of unexpected futures with you: Each Friday we will publish a new Wild Card including a brief evaluation and of course, my team and I are very curious about your thoughts on each of the cards. What do you think the world or the country you live in will look like if the Wild occurs? How will it affect your workplace, your industry, or private life? What was the first thing that came to mind when you read the card? So please, stay tuned for our first Wild Card next Friday and comment on it extensively! In addition, if you have a potential Wild Card on your mind, feel free to tell us and the LinkedIn readers about it and describe in a comment!