When facing potentially extreme outcomes, forecast risk

Typical project planning puts a single price tag on the desired outcome. In stable situations (e.g., simple projects of short duration), this may be adequate. But in situations where the likelihood of disruption is high and the consequences of a disruption will be costly, it is more helpful to forecast risk across the range of possible outcomes.

If you face a fat-tailed distribution [where the likelihood of unexpected shocks that disrupt the status quo is high], shift your mindset from forecasting a single outcome (“The project will cost X”) to forecasting risk (“The project is X percent likely to cost more than Y”), using the full range of the distribution.^[1]

#foresight #management

See also:

• Strategic forecasting guides decision-making and catalyzes innovation
• Adaptability is the capacity of actors to manage the resilience of a system