Shock index
Shock Index attempts to forecast nation state resilience to surprise by defining potential future tipping points over time and analyzing their likely impact through scenarios that explore possible surprises and unexpected deviations from existing baseline global risk levels.
Uses of the method
- Early warning system of systemic, future risk for financial institutions, governments, commercial companies, trusts, insurers, high net worth individuals and sovereign wealth funds
- Long-term assessment method for companies with complex, global logistic chains requiring stress testing of their network and organizations with long-payback investment decisions in other countries
- Risk assessment of countries ability to recover quickly from different shocks under different scenarios
Benefits
- Fast understanding of which countries are likely good and bad future investment opportunities and where to place cash
- Valuable method to ensure that all the relevant issues have been considered
- Systematic, comprehensive and multi-purpose
- Fast and ultra-low cost
- Can be updated as events unfold
- Can be used by both individual analysts and teams
Disadvantages
- May be incomplete if not used with other methods or iterations do not go deep enough.
- Judgmental in approach. Relies on assumptions and analyst opinions
- May miss an unexpected surprise
Steps to complete
- Select a year to forecast
- Then consider each indicator in turn and rate for impact.
- Weight the rating, if necessary, depending on the focus of your analysis
- Estimate your confidence level in the likely accuracy of your forecast
- Save your work and the page will update with your latest forecast.
- Create a PDF of your assumptions, click the Edit button and upload the PDF to save your work.
- Repeat for more years as necessary
- Click 'Show results' to view your analysis and the aggregated view of others. By clicking on any column in 'Show results' you can see the results in highest and lowest ascending orders.
- Print your single country results by right clicking your mouse or use Snagit (www.snagit.com) to save the image.
- To analyze and compare several countries click 'My Reports' in the left-hand navigation bar
- Click Forecasts and then Shock Index to show the country by country table.
- Columns can again be sorted as before.
- Then use the | Assess | Assumptions | method to consider your results:
- Determine the fixed factors (almost certain hard trends) that will inform your strategic response: slow-changing phenomena e.g. demographic shifts, constrained situations e.g. resource limits, in the pipeline e.g. aging of baby boomers, inevitable collisions e.g. climate change arguments.
- Capture variable factors: critical uncertainties i.e. variables, soft trends and potential surprises. Both these and the fixed elements will be key to creating scenarios and examining potential future paradigm shifts.
- Capture unique insight into new ways of seeing that can be utilized by the organization.
- What conclusions can we draw from the exercise(s)?
- How might the future be different?
- How does A affect B?
- What is likely to remain the same or change significantly?
- What are the likely outcomes?
- What and who will likely shape our future?
- Where could we be most affected by change?
- What might we do about it?
- What don't we know that we need to know?
- What should we do now, today?
- Why do we care?
- When should we aim to meet on this?
- Finish by noting your next steps. Next steps could include a further round of iteration, a recommendation on how to get the answers or use of other research and methods such as 'Scenarios' to create more vantage points on the issue.
Collaboration
'Shock Index' can be shared with others or kept private using the 'Visible to' fields and through the 'tag', 'report', 'share'', 'link and 'comment' functionality. Use 'tag' and/or 'report' to aggregate your analyzes, 'share' with others via email, Facebook and Twitter etc. or add a 'comment' to ask others where they agree/disagree and encourage them to make their own analysis from their unique vantage point.
Further reference
History
This tool was first conceived by Adrian Taylor, Henry Kwok and Mike Jackson over a late night beer at the Singapore Risk Assessment and Horizon Scanning Conference in October 2011.
Adrian suggested that there was no tool available in the marketplace to assess the impact of future shocks on countries ability to operate. He contended that in a period of increasing surprise traditional risk assessment models are inadequate and that scenario-based forward risk assessment would help organizations better prepare for and become more resilient to change.
The schema for such a novel tool was developed during breaks in the conference and developed over the next four months. It is the first and only method today that forecasts future resilience based on a high-level series of strategic criteria that indicate likely resilience and stability of a country to future shocks.
Contact us
Even with all the advice and tools we have provided here starting a foresight project from scratch can be a daunting prospect to a beginner. Let us know if you need help with this method or want a group facilitation exercise or full project or program carrying out by us. We promise to leave behind more internal knowledgeable people who can expand your initiative for better organizational performance.
Contact us today for a free discussion on your needs.
Are there other enhancements or new methods you would like to see here? Let us know and we will do our best to respond with a solution quickly.
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