by Richard Martin

© Kheng Guan Toh

I’ve been answering questions lately (from my daughters, among others) about the threat of war, specifically nuclear war. This obviously comes from the worries about North Korea’s nuclear capabilities and intentions, as well as American ones.

Although this concerns military strategy and geopolitics, the underlying analytical approach can be applied to any consideration of threats, whether a generic SWOT analysis, or the evaluation of a specific security or competitive menace.

Threat analysis goes beyond risk analysis. Risk is the product of the probability and impact of a negative event or cause. Risks are usually categorized under three headings: natural, technological, and human. Focusing on the last, there are criminality, security, labour conflict and many other sub-categories of human originated risks. The problem, however, comes in evaluating the likelihood of a human risk. If we are considering only generic risks, we can talk about probability and impact in abstract terms. For instance, what is the probability of a criminal act? We can use statistics about, say, white collar crime in corporate settings as a starting point for assessing the risk. There are statistics describing the probability of certain acts in certain situations along with average impacts (including their statistical distribution).

But how can we assess a specific threat where there is no historical or statistical data to illuminate the analysis? That’s where military-style threat analysis can be very useful. Military threats are broken into two parts: capability and intent. Capability is self-explanatory: What can the potential or actual enemy do? What are the quantitative and qualitative characteristics of his forces? How many tanks can he deploy? How many aircraft? In the case of North Korea, how many nuclear bombs, of what type, and through what means can they be delivered? I discussed this at length in early September with Dr. Sean Maloney of RMC, an expert on nuclear history and strategy.

While there is uncertainty in capability assessment, at least we’re dealing with tangible realities. Intent is a completely different ballgame. How do we know what the enemy will do? How will he react to our own threats or efforts at conflict resolution? These are imponderables and we must consider a range of scenarios to determine the inevitable commonalities that arise in each, so we can prepare for them. We must also examine the action-reaction cycles that occur because of the moves and countermoves by both sides.

An analogous approach can be used in analyzing and assessing business threats, even though the stakes are obviously of a completely different order and importance. Whether you’re trying to assess your competitors’ next moves, or your market’s reception of your new product, you can learn a lot by considering the threat as both capability and intent. This allows you to disentangle what is possible (given assessed capabilities) from what is probable (given assessed intentions) over a range of scenarios. The insight gained can then be incorporated into your own strategy and contingency planning.

© 2017 Alcera Consulting Inc. This article may be used for non-commercial use with proper attribution.

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