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There May Be Trouble Ahead… So How Do We Navigate Uncertainty in Business?

There’s nothing like starting a new year on a negative note, but let’s face it, as 2019 rolls out before us, there’s only one topic of conversation in town right now. And no, we aren’t talking vegan sausage rolls.

What has long troubled business about the whole Brexit process is the uncertainty surrounding it. And with less than three months to go, and no assurances yet about whether there will be a deal in place or not, that leaves everybody second guessing exactly what will happen next.

With no trade deals in place, no guarantees about how customs arrangements will work for imports and exports, no clarity on what sort of state the pound will be in come April, that makes it very hard for anyone to plan for the rest of the year.

Yet if we acknowledge that standing around biting our fingernails is not an option, what can be done? Well the world of management theory is not without its contributions in this regard.

VUCA

One of them is what is known as VUCA contingency planning – volatility, uncertainty, complexity and ambiguity.

As this Harvard Business Review piece points out, the problem with VUCA is that it tends to treat all four types of obstacle it deals with as the same, and therefore suggests similar responses. This is overly simplistic, because situations that are volatile or uncertain or complex or ambiguous, or any combination of these, differ in important ways.

The first priority, then, is to identify the nature of the challenging circumstances ahead so the most appropriate response can be prepared. To borrow HBR’s definitions:

  • Volatility characterises challenges that come about suddenly and unexpectedly.
  • Uncertainty, by contrast, arises from known and anticipated causes.
  • Ambiguity stems from having no relevant precedents to a situation, so outcomes are hard to predict with any certainty.
  • Complexity describes difficulties where causal outcomes can be predicted, but there are so many possible pathways with such a web of interconnections that the task of doing so becomes fiendishly difficult.

If we consider the challenges facing UK businesses in the months ahead, then we certainly know the causes – departure from the EU – and can therefore treat circumstances as uncertain rather than volatile. We can also say that we have absolutely no precedent for current events, which means everything is shrouded in ambiguity. There may be complexity further down the line as new economic and trading environments emerge, but we are not there yet.

Clearing the murk

So how can businesses plan for ambiguity and uncertainty in the months ahead? Both denote a lack of clarity and knowledge of different degrees, so the logical remedy is to prioritise gaining knowledge. Different models for various scenarios and outcomes can be tested and compared, with appropriate plans and policies drawn up for dealing with those deemed most probable.

Given this thirst for knowledge, now would be a good time to invest in beefing up your data analysis capabilities so you are armed with the the kind of intelligence that could just help you ride out the roughest storms. And the process of analysis itself, as with testing different hypotheses, can provide invaluable insight into risks and vulnerabilities in your business, giving you an opportunity to address them.

Longer term, the consequences of Brexit may well spark volatility in the markets. As we can’t say with much certainty one way or the other, it seems expedient to build slack into your resources, capital reserves and cash flow to provide a buffer for worst case scenarios that may lie ahead. This will also give you what you need should everything get complex and you need to look at restructuring and streamlining to ease the pressure.