Crowdsourcing through the lens of risk management

A few months ago some of my Barnett Waddingham colleagues, who work with a range of clients, sat down with an interviewer to discuss concerns over the cost of doing business and the more personal framing of the same issue, the rising cost of living.

What is clear is that there are no easy answers to these complicated issues, but some options may work for some people in some circumstances. Indeed, we should be impressed with the innovation possible in areas that most would regard as too highly regulated for innovation to be possible.

But perhaps we should not be surprised. For example, in the area of risk, there was a clear call for organisations to crowdsource views in this complex, interconnected and volatile world. This would harness the expertise and knowledge of others rather than try and single source understanding and solutions.

As highlighted in our video discussion, who knows your organisation better than the people who work there?

In this article we expand on this crowdsourcing concept, recognising that it will be new ground for some people in leadership. We address what types of problems crowdsourcing can help with and, importantly, how the success of crowdsourcing depends on diversity.

The value of crowdsourcing

We frequently hear a storm or other weather phenomenon the forecaster describes as a 'Weather System'. We accept the general nature of the forecast given for this weather system because we know how complex and impossible to predict the details can be. It is because we understand that the weather in any part of the world is linked to a global weather pattern, which is in a state of constant change at the microclimate level. Sure, we expect the forecast to include some upper and lower expectations on how much rain may fall or the range of temperatures. Still, if our significant decisions rest on highly accurate detail, then the problem is challenging.

Considering the currency exchange system, you can see a similar pattern of complex and hard-to-predict systems where the pound interacts with the dollar, the euro and every other currency of the world. Currency systems also interact with products and services because that is how trade works. And, as we saw in the autumn of 2022, currencies and other financial systems also interact with geopolitics and trust.

In each example, the transaction is relatively small at the lowest level; a wind blowing onto an island, rain falling at the foot of a mountain, a transaction of Australian dollars for Euros to provide spending money on a planned family trip. 

And when we think about large projects and substantial strategic development problems, they are problems of this type, where many simple, small, easy-to-understand transactions combine to make the overall plan complex and the final outcome hard to predict. 

What we see with all such problems are emergent behaviours which are difficult to see before they start, and sometimes these behaviours produce extremes of unwelcome consequences. This is seen in weather systems when tornados suddenly erupt from a combination of localised climate conditions. And how personal financial hardship emerges from wars in far-off lands, and how supply chain interruptions manifest in different countries.

As humans, our tendency (driven by our brain's limitations) is to contemplate a limited number of options. We can only start from where we are, and we can only draw on the experiences we have. And suppose all the people in our small decision-making circle are drawn from the same stock, conditioned by the same information and drawing on similar experiences? In that case, we have a group with limited understanding destined to explore a limited set of future options.

So, when facing such complex, dynamic, interconnected and hugely important issues, crowdsourcing can be used to widen our perspectives. With crowdsourcing, we harness a broader set of views from a broader group of people with a more comprehensive set of experiences who see the problems from different viewpoints. From this richer pool of talent, we may see a deeper level of understanding emerge and a more comprehensive range of workable options to use when we need to respond with strength and agility.

Diversity and inclusion for innovation

Diversity and inclusion are essential, but their contribution to decision-making is frequently misunderstood. It is not just about having gender and ethnic balance to reflect society, although that is important. It is not just about equality in conditions and pay, although these too, are important. With crowdsourcing - diversity in viewpoint, experience, training, lack of training, theoretical understanding, practical understanding, seeing the problem from different life choices, and a host of other diversity variables matter.

We expect some readers will pick up on how we have included things like 'lack of training'. Yes, because sometimes, people who learn by experiential paths subconsciously know and understand things that others with a theoretical understanding miss. Need an example?...

How does a child learn to catch a ball thrown to them? With a mathematical knowledge of how the ball travels? Could a child, or even an adult, explain what they learned to move and position their hands to catch a ball reliably?

What matters is that they can learn to catch a ball, and if they can do it well enough, they may have a future in sports even if they never understand the mathematics involved.

A group from Barnett Waddingham met and discussed "What does diversity cover?" Even if your circle is small and all the people are of the same ethnicity and gender, if their experiences are different, you have the start of diversity in your pool. This is perhaps too limited for radical thinking but almost certainly better than a pool of one.

We generally link the two words, diversity and inclusion. They are not the same thing, but you must embrace inclusion to have diversity because exclusion reduces diversity. That said, there are limits. In crowdsourcing for risks, risk managers must have a rationale for inclusion based on positive factors that mean the individual under consideration will likely make some plausible contribution and not just serve as a total distraction. It is a complex judgement, and the benefit should always be given to inclusion when the decision is unclear.

An example of crowdsourcing success

An exercise using the crowdsourcing technique was arranged to consider the rise in general obesity, which may become a first-world epidemic. It is an almost intractable problem with its complex mix of dynamic social causes, commercial activity, human frailty and moral dilemmas. It is not easy to understand how it will develop as a societal problem and the consequences for commercial activity.

Most of the crowd in this exercise focussed on food items that add to the body's fat intake, providing meaningful insight and creating options for future action. However, this example was chosen because one small group who participated picked up on the widespread use of additives that don't contribute to fat but change the digestive chemistry so that more unhealthy fat is extracted from the food consumed. That remarkable insight could easily have been missed and is an example of what broad diversity, which was built into this exercise, can do when combined with the crowdsourcing technique.

Visit our Risk Portal to see how we've used crowdsourcing at Barnett Waddingham for risk identification of our own business - we surveyed our workforce of more than 1300 people and analysed over 1300 lines of data.

Crowdsourcing for business success

So, in drawing this article to a close, let's return to the cost of doing business and the cost of living issues. We cannot give specific answers in a general blog, but we can identify where the techniques may add value and help generate useful responses to this challenging problem.

As an organisation, perhaps crowdsource where costs can be reduced without compromising quality. This is not the same as implementing budget cuts identified within the finance team, as these may lead to unexpected and unwelcome consequences that systems are notoriously able to deliver.

In doing all these, perhaps reap the rewards of increased productivity from a workforce that feels like a much more important part of your organisation. At the very least, your workforce may come out of the exercise with greater understanding and respect for the organisation's efforts to find solutions.

What about improving the prospects for individuals as an important step in ensuring the wellbeing of your workforce? First, look at the ideas shared by colleagues from some of our Barnett Waddingham teams on how they can help people in your organisation. There were some really innovative ideas shared. And then, crowdsource ideas from your workforce on what ideas they can suggest may help. Of course, many ideas will be unaffordable, impractical, and possibly even illegal, but you may identify some good, cost-effective ideas to implement.

To sum up, it's important to acknowledge how difficult these problems are to solve from a limited viewpoint and with little diversity. That's why crowdsourcing is a powerful tool for generating new ideas and initiatives while mitigating risk.

If you would like to discuss any of this topic in more detail, please contact your usual Barnett Waddingham consultant. You can also get in touch by emailing RAA.group@barnett-waddingham.co.uk.

To find out more about crowdsourcing opinions and using scenarios for decision-making, Keith also covers this in a webinar on Managing risks from highly disruptive events, accessed through our Risk Portal.

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