The Fourth Quadrant of Risk

Q4 concept

Business risks can be divided into four quadrants based on awareness and quantifiability. The first is the known knowns. These are the normal risks that are part of the rough and tumble of everyday business. Since they occur with some regularity, they can be quantified with statistical tools.

The second quadrant is the known unknowns; risks that the organisation is aware of  but are difficult to quantify such as terrorist attacks, a cyber breach, a bird flu epidemic  or an earthquake. Companies often spend much time and effort conducting risk assessments in this area, but the commercial value of this is questionable. These are events that we know could someday happen but we have no idea when.

The third quadrant is sometimes called the “black swan” quadrant. For a long time it was assumed that all swans are white. No-one knew that black swans existed until the first ones were found in Australia. The third quadrant is where the unimaginable lives. Some risk management consultancies claim to help prevent “black swan” events, but these claims must be bogus by definition since these are unknown unknowns; risks that we are currently unaware of and also unquantifiable.

At Quadrant Four Risk, we think the most fruitful area to focus on is the fourth quadrant; the unknown knowns. In other words, risks that you may not be aware of. …but someone else is!

Communication in large organisations is often dysfunctional. The answer you seek is probably already known to someone inside your company or freely available somewhere on the internet. The best way to reduce your risk profile is to invest in the Fourth Quadrant. So why not get in touch with us…