Somehow

Somehow 

 

Somehow the world has avoided real catastrophe in 2022. So far anyway. It almost seems miraculous, with the war in Ukraine and the severity of drought in the western US (to name two near misses) and the temporary halting of grain shipments from Black Sea ports. Those two could have resulted in food shortages and mass starvation around the world. We aren't out of the woods yet, and 2023 holds at least as many challenges as ‘22 or even ‘21. Systemic fragility is growing, and while the world has coped, that certainly cannot be taken for granted in the coming year(s). 

 

Somehow, we need to prepare for this. And this means personally, also at the company or corporate levels, and definitely at national and transnational government levels. Are we ready? I'm not confident. 

 

Risk Management requires looking beyond the day-to-day activities and considering potential outcomes from those activities. This includes personal, corporate, societal and government activities. Risk Managers are best positioned to communicate potential scenarios that may benefit or harm individuals, companies, society, etc.  

 

It is also incumbent on the Risk Manager then, is to facilitate communication, and also to look to themselves and those around them, to consider and assess the potential personal impact, and to prepare. 

 

Somehow, we each need to consider our plans and options, and then act. 

 

Somehow, all that has happened in the past year(s) does not represent an end, but only part of a continuum of change.

Cryptocurrencies have collapsed, and with them, well, nothing yet, other than some seriously distorted egos, and possible in the global economic system in 2023. Still, a lot of “money” was created out of thin air over the past decade, and much of it disappeared back into thin air this year. But again, was any of it real? I guess to small “investors” (speculators) it did, for many, have a serious impact. 

 

On the other hand, there were no new pandemics. But there could be, and probably will be. Well, not ”probably”; certainly. Will governments, businesses, society, and individuals be ready? Who knows? But I have only modest confidence that society will be able to cope with a “real” pandemic. Avian Influenza remains my biggest worry, should it become easily transmissible from human to human. 

 

The freeing up of Covid restrictions in China, after a Zero-Covid policy that saw them come through the first waves fairly unscathed, is now resulting in a wave of Covid across China that is quite scary. Will this create a sizable enough pool of viruses to encourage serious mutations leading to a renewed global pandemic? Who knows, but if it does, we can be pretty confident that there will be suffering on a scale that we did not see in the first waves. Covid restriction exhaustion will clear the field for newer and more serious strains to run rampant worldwide. 

 

Hanging over all of this is the slow-motion (with sudden grim reminders) Climate Change. Melting glaciers, Greenland itself melting with all sorts of grim predictions. The Antarctic ice shelves and equally grim predictions. Is the ongoing North American drought going to abate any time soon, or will climate change reinforce the existing drought conditions and make matters worse?  

 

Through all of this, there is a sense of limited personal ability to respond. What can we as individuals, do that will actually make a real difference. Sure, let's all use metal straws.  

 

The reality is that for most people on this planet, the only changes that they need and want to skew toward more consumption and resource use, not less. And we cannot say to billions of people that they cannot have food security, electricity for lighting, heating, cooking, and all other activities that reduce suffering and expand the quality of life. For goodness' sake, we cannot even get people with everything in rich countries to stop spending, using, and consuming, all to show that they are, somehow, superior to their “peers”.  

 

For the rest, the 10% or even the 15%, it is frustrating to feel that there is little that can be done that will make a real, tangible difference. What can I do to bring the rains back and refill dams in North America? What can I do that will stop the melt in Greenland, or reduce the temperatures in Greece and Spain in the summer? 

 

Through all the frustration and sense of personal disempowerment, we still need to be considering our own responses. Inaction is a response. But planned or accepted inaction is different from ignorance-based in action.  

 

On a call last week talking about sustainability, I posed a question about actions to prepare for the impact of climate change. My challenge to the panel was to consider responses in three categories: 

 

1. Personal. How should we be preparing for ourselves and our immediate family, and in a wider circle those important to our community and us? 
2. Corporate. What should companies be considering and doing? 
3. Government and their responsibilities to their people, environments, and basically anything ‘too big’ for categories 1 and 2. 

 

I think we all need to be looking at the coming year(s) with this in mind. 

Is Risk Management Broken? No, it isn't.

"Risk Management is Broken!"

I cannot count the number of times I have heard or read that Risk Management is broken, and the number of times I've then asked why and how it is broken. Invariably the answer, distilled to the most basic elements, is that Risk Managers have not adopted MY view of what Risk should be, and the view (and associated consulting) that I am selling.

The contrary view is that Risk Management is a discipline that is most effective when tailored to the needs and capabilities of the enterprise, and that is communicating the information needed to enhance decision-making. Where Risk Management is not assisting with improving decision-making, then it is not as effective as it could be. 

And it is arguable that many, possibly most, Risk Management functions, and many Risk Managers, are not supporting more effective decision-making. That's not the same as "Risk Management is broken".

Therefore, while those functions may be "broken", it is not right to extrapolate such a status across all Risk Management.

There is hope. Most Risk Managers that I have met actually want to support and enable improved decision-making. So instead of saying "Risk Management is Broken", maybe we should be focusing on how Risk Management can improve decision-making. 

Thoughts?

 

Careful what we ask for

We must be careful “what we ask for, for we may surely get it”.  

The overthrow of Putin will not end the war in Ukraine, and may worsen it. Putin, as the leader of Russia, is also a reflection of the will of the Russian people. A significant majority of Russians still support Putin and the war. There is a long way to go before the Russian people will be ready to stop the war or relinquish the territories already conquered. 2023 or beyond. 

First, of course, Putin may become the symbol of Russian failure in Ukraine. Do not expect a groundswell of feeling that the struggle in Ukraine is unjust; that will be asking too much of the average Russian. The easiest target before turning on Putin will be Defense Minister Sergei Shoigu, who, by all accounts, has not done a very good job of the invasion and has never served in the Russian (or Soviet before) military.  

It is easier to lose faith in one individual than in a national philosophy of victimhood and rejection. A facesaving narrative is difficult to reject, like the post-Soviet states joined NATO not because they were afraid that Russia would revert to its previous imperial dreams, but because NATO forced them to join and occupied the former Warsaw Pact countries.  

As long as that kind of thinking remains the default message, unchallenged, there will be strife and a willingness to invade other countries. The rebuilding of the "legitimate Russian Empire" will not disappear as a national goal. There will remain resentment against all countries that joined NATO (they were too weak under pressure, and too weak to stand up for Russia) and against any country that considers joining NATO (cowards and traitors to their Russian people). The loyalty and obligation of Russia to Russians outside the Russian Federation will remain.  

The Soviet Union was not a conglomeration of independent countries joined in a “union”; it was the Russian Empire under another name. The fact that some leaders came from constituent “Republics” does not change the very Russian nature of the USSR. Therefore, the fall of the USSR in 1991 was the second fall of the Russian Empire in a century.

If, and it is a huge “if”, Putin was overthrown (or were to die of a “natural cause”), we should not expect any new leadership to disavow the invasion of Ukraine, nor de-annexe the newly annexed territories. Crimea will not be on the bargaining table even if new leadership does agree to talk.  

Personally, I discount any reports of Putin's health. He is as healthy as any national leader, but that requires a digression that I'll avoid. 

Therefore, if suddenly he is no longer the President of Russia, it will have been through a coup, and a coup will not be staged by defeatists and the weak. Coups are not easy things, and they are rarely clean. Those perpetrating coups are ready for blood to be spilt, and the blood of their own compatriots who oppose their taking power. These are not the people who will seek to stop a war so that adversaries will no longer be hurt or killed.  

Yes, hundreds of thousands are fleeing the country to avoid conscription in a poorly performing military. But these hundreds of thousands didn't try to leave before the mobilisation and threat of conscription. That is not the same as being willing to go out into the streets in adequate numbers to force a change. That won't happen, yet. More importantly, most Russians still support the war, though that support is eroding. 

It will take time and more battlefield defeats to swing opinion definitively against the war and, when that happens, against Putin's leadership. 

But National Honour will demand a victory, until it becomes very clear that such a victory is impossible. While we in the west may have come to the conclusion that a Russian victory is impossible, Russian media most certainly has not come to that conclusion. 

Overthrowing, or otherwise replacing Putin (after he replaces DM Shoigu and keeps replacing generals), might not result in a peace-seeking government. It may result in another hardliner taking power and redoubling efforts in Ukraine. The real danger is that a replacement might decide to blur the lines with NATO and test NATO's actual resolve, potentially by hitting supply or logistics centres on the “other side” of the Ukrainian border with Poland, for example. As NATO definitely does not want to get into a war that may escalate into a nuclear conflict, a new strongman in the Kremlin may decide that NATO's redlines can be ignored. 

A Putin replacement will know that he (and I am assuming that it will be a “he”) knows that he must deliver battlefield victories, quickly, or suffer potentially the same fate as the Kerensky government of 1917. Wikipedia sums it up best: " Despite mass opposition to the war, Kerensky chose to continue Russia's participation. His government cracked down on anti-war sentiment and dissent in 1917, which made his administration even more unpopular. Kerensky remained in power until the October Revolution."

Therefore, we should be careful what we wish for. And Russia should be particularly careful what it wishes for in the coming weeks and months. 

Instability in the Russian periphery

This is just a very quick note to highlight the medium-term potential for serious conflicts around the Russin periphery. The 'distraction' of almost all of Russia's combat capability to the Ukrainian war will deprive Moscow of its influence across the rest of its sphere. 

Already we see a renewed conflict between Azerbaijan and Armenia, a conflict that is 30+ years old, but 'frozen' by the Russian alliance with Armenia, until two years ago when Azerbaijan finally felt they had the capability, will, and ability to achieve their goals before Moscow could enforce a peace. 

It seems Azerbaijan may believe that Russia will not have the authority of power to impose a new peace. This could mean a renewed war. Already 'border skirmishes have killed almost a hundred people over the past couple of days. This could get much worse, quickly. Armenia has called on Russia to send military support and peacekeeping. That is unlikely to be at a force level sufficient to deter Azerbaijan.

This is one example only.

Looking westward to Georgia, will they contemplate asserting its sovereignty over South Ossetia and Abkhazia? Both were taken from Georgia in 2008 in response to Georgia's insistence on seeking NATO membership. Neither South Ossetia nor Abkhazia has been incorporated into the Russian Federation, but both have been recognised by Russia as 'independent' states and are garrisoned by Russian troops. 

How long will it be before Putin is forced to hollow out his garrisons, and what will Georgia's response be?

How long will Chechniay continue to play the game of being a quasi-independent state within the Russian Federation? The cream of Chechen pro-Russian forces are committed to Ukraine, leaving a rump of 'loyal' forces at home.

The coming couple of years could see renewed conflict surrounding Russia. Much will be blamed on external interference (the CIA, American and European clandestine support, Islamic fundamentalism supported by the Taliban and Iran), and much of it will be. After all, stirring up the provinces has been a time-trusted way of distracting the centre. 

With or without external support, expect the Russian periphery to become an active, and dangerous area of the world. There are too many scores to be settled, and there is no longer a central force strong enough to enforce stabilisation. 

Because Putin loves history - he should look at these four years

Vladimir Putin loves history. He has studied it, written about it, and most recently, used it to justify the invasion of an independent country whose borders his own government promised to respect and protect. There are two uses of history; to learn what has happened and how it shaped our world, and to use it to seek insights into what may happen in our world. Vladimir Putin has used his pieces of history to create a narrative of "how we got here" and is using that to attempt to shape a future. Unfortunately, his selective and sometimes flawed use of history results in a future that probably will not meet his expectations. If he, and we, are to look again at history to try to see the future, I would suggest that there are four years that he might look at - only one of those contained an outcome that might be acceptable to him.   

The years I have in mind are 1814, 1917 and 1989, and 1939. Each year represented a turning point and a resolution to a crisis that provides superficial allegories at best to the current situation, and the "end game" for Vladimir Putin. Only one of those, 1939, gives an outcome similar to what he seeks. While delivering a victory, even that result also portends years of isolation and economic stagnation.  

The invasion of Ukraine has not gone according to plan, regardless of what Moscow continues to say. The collapse of the Kyiv front and the resources required to take Mariupol cannot have been "part of the plan". A rapid collapse of Ukrainian resistance and Zelenskyy and his government fleeing into exile would have enabled Russia to stop hostilities while retaining a robust military capability. That didn't happen. It also would have forestalled resupply and the level of support that the west has been funnelling into Ukraine, all aimed at bleeding the Russian military.  

Now advanced western arms are degrading Russian capabilities by the day, reaching further behind the lines at distances that Russians expected would be out of range, and striking with a level of accuracy than was not anticipated. Ukraine is hitting Russian logistics centres, command centres are targeted, and senior leaders are killed and wounded.   

While we cannot directly understand the level of the 'ordinary' soldier's morale, we should use caution in assuming anything at this stage. After all, the Egyptian Third Army, trapped and surrounded in Sinai in 1973, never surrendered and had reasonably high morale throughout. We should not assume that Russian forces in the Kherson Oblast are suffering from low morale, even partially cut off by attacks on the bridges and pontoon bridges across the Dnieper River.  

Basically, this war could still "go either way".   

However, at this stage, it does appear that the momentum is on the Ukrainian side, and with the continued flow of western material, training and intelligence, my expectation is that Russia will, by the end of the year, be exhausted.   

Of course, Putin can declare victory, tell his troops to take up defensive positions, and declare a unilateral ceasefire. That will have little or no effect. As the Ukrainians are not yet adequately exhausted to accept such a ceasefire, the likelihood of Putin being able to halt the war in the status quo is pretty slim. This means that the 'end-game' is still some time away.  

So let's turn to the years that provide a reference for possible outcomes.

1814 - Exile  

After invading Russia in 1812, Napoleon reached Moscow and, facing winter in a burned-out city with no way to supply his troops, was forced to retreat. The retreat from Moscow is one of the great military disasters of all time. Two years later, Russian, Austrian, and Prussian troops occupied Paris. (We get the word "Bistro" from the Russian for "quickly", hence a more casual French restaurant.)

With Paris occupied, the Treaty of Fontainebleau was signed, and Napoleon was stripped of the title of Emperor and exiled to Elba.   

Indeed, the end of Napoleon's Empire and his exile to Elba is not a perfect analogy (especially with his return the following year and his final defeat at Waterloo). Still, if we are to exchange Napoleon's thousands of troops lost in Russia for billions of dollars in seized or sanctioned assets, there is a useful analogy. And indeed, exile under his terms might be the one way that Putin comes out of this alive.  

Putin may find himself in a Moscow "occupied" by oligarchs sick of the war and the decimation of their fortunes, limitations on their movements, and continually wondering when they might be the next oligarch to be defenestrated. As Putin's allies continue to meet unfortunate ends, as seems to be happening with some frequency, there will eventually be a revolt. Someone will need to approach Putin with the kind of support that avoids a quick trip to the gulag or out the window, and give him the news that it is time for him to go into exile.  

Such a message and messenger may need to remind Putin (with adequate support behind them) of another option...  

1917 and 1989 - Revolution  

1917 and 1989 provide two dramatically unfavourable end-games. During World War I, Imperial Russia did not fare well. In 1914, the Battle of Tannenberg resulted in the destruction of an entire Russian army. Russian military capability never fully recovered. Economic pain coupled with disastrous military prowess resulted in collapsing faith in leadership. Two and a half years after Tannenberg, on March 15, 1917, Tsar Nicholas II abdicated, and new governments were formed and collapsed. Six months later, the Bolsheviks (whom Putin was raised under and admires) had taken over the central government.   

 

What followed was a civil war that lasted another four years, eventually resulting in total Soviet domination and the beginning of the Soviet era that Putin looks upon fondly. In part, this explains his reluctance to implement a general mobilisation. The risk that such a mobilisation of large masses of poorly trained cannon-fodder will further erode confidence in his leadership, and eventually turn either the military against him, or bring real revolution to the streets.   

This should remind us of 1989 in the city of Timișoara and soon in the streets of Bucharest. The remarkable thing about the 1989 Romanian Revolution was that it lasted a total of nine days, from the initial protest over a housing dispute with a local priest in Timișoara to the execution of Nicolae Ceaușescu and his wife Elena on Christmas Day.  

A student of history such as Putin should not forget that such revolutions seem to start from nowhere, and explode. Even if sycophants surround him, I expect even he recognises the potential risk if he cannot manage the economic fallout from his invasion, or if his military breaks in Kherson or Donetsk.   

Still, the military might not break, and the economy might not suffer to the point of revolution. The oligarchs might give him the time he needs to reach 1939.  

1939 - Opposition collapse and Victory  

After three years of hard-fought civil war, the Nationalists in Spain held the upper hand. German support for the Franco government effectively countered Soviet support for the Republican government. The unified command structure of the Nationalists, and access to a larger resource base (including "Moors" from North Africa) countered the splintered Republican forces. Anarchist and Communist forces were turning on each other and themselves, and battlefield losses were irreplaceable.   

 

By mid-1938, the Republican government was in retreat, and the final counteroffensive failed in November, leading to the collapse of effective opposition. Over the course of three months in early 1939, the Republican forces collapsed, and the Nationalists took complete control of the country, ending the Spanish Civil War, but effectively locking Spain into decades of isolation.   

Putin continues to hope for a 1938 result (failed Ukrainian counteroffensives) and dreams of an early 1939-style collapse of Ukrainian opposition. This is the only end-game that gives Putin an outcome that can be called a victory, even if it means multi-decade ostracism by Europe, the United States and the rest of the western-leaning world.  

 

And this outcome is still possible. We do not have visibility on the state of Ukrainian morale, force levels and depth of reserves and potential reserves, nor do we have visibility on true Russian capabilities. The Ukrainian counteroffensive underway as I write, could falter or could be successful. The ultimate failure of the Ebro campaign in 1938 contributed to the collapse of Republican morale and the ultimate defeat of the Republican government.   

 

So, the 1939 end-game sees a collapse of Ukrainian capabilities and morale, breakthroughs by the Russian forces sweeping westward, and the fleeing of the Ukrainian government into exile in Poland and further westward. Putin is hailed (internally) as the saviour of Mother Russia and the rebuilder of Russian glory.   

Summary:  

At this stage, there appear to be only three options as the "end-game" for the Russian invasion of Ukraine. Outright Russian victory (at a cost, short and long term), a revolution in Russia (which could appear in the form of the assassination of Putin), or a negotiated exile of Putin and his closest family and supporters. Historically there are precedents for each.