How Volatility, Uncertainty, Complexity and Ambiguity Shape Risk Management: Risk and Insurance


James Curbeam, CPCU, ARM, AIC, is the Director of Risk Management for the Las Vegas Valley Water District. He holds a BS in Finance from Creighton University and an Executive MBA from the University of Nebraska at Omaha. James has held the following industry leadership positions: President, Nevada Chapter of RIMS; President, Nebraska Chapter of RIMS; and president of CPCU of Las Vegas. James is also a founding member of the American Water Supply and Management Association, which was established as a thought leadership lab for risk management in the water industry. He was also named PRIMA Risk Manager of the Year 2019. Jacques can be reached at [email protected]

Risk managers face difficult times.

Today’s risks to organizations are definitely different from those of the past. VUCA is the term coined to describe these risks. VUCA has become a fashionable acronym for volatility, uncertainty, complexity and ambiguity.

Let’s examine these terms one by one.

Break down VUCA

Volatility describes the challenge of coping with the unexpected or an unstable environment.

In Las Vegas in particular, hotel businesses have had to deal with the government shutting down their operations.

For most organizations with sophisticated risk managers, there was no ability to transfer that risk. Thus, these losses have directly impacted companies’ balance sheets and the dismissal of thousands of employees.

Uncertainty represents a lack of understanding of the cause and effect of events.

During the pandemic, the government tried to minimize the impact on individuals by extending unemployment benefits. Currently, businesses are faced with the reality of trying to reopen realizing that it may be personally beneficial for individuals to stay at home and not return to gainful employment.

There are dependencies everywhere that need to be considered today to truly mitigate risk. Due to this complexity, risk managers, unfortunately, must operate most of the time in a reactive posture.

Cyber ​​exposure is a perfect example of such a risk.

The strategy for mitigating cyber exposure is too often established after an organization has had the good fortune of not being among the companies exposed to a loss.

When information has multiple meanings, it can be difficult to make decisions. In a world of ambiguity, the causal relationships are not at all clear. Sometimes no precedent exists and the manager encounters unknown strangers.

After the death of George Floyd, for example, attention was drawn to social injustice. Many organizations struggled to figure out what and if they should have an answer.

In 2017, the Oxford Dictionary expanded its definition of the word “awake”; it was added as an adjective meaning “alert to injustice in society, especially racism”. There are liberals demanding that corporations wake up and, on the other hand, conservatives attacking woke corporations.

Although Oxford has established a definition of “awakened”, it seems to understand that the definition varies in society.

Despite the vagueness around the term, you regularly hear it referenced. As a risk manager, how would you advise your company to react to this new term? How do you advise your organization to deal with this ambiguity and others in the VUCA world?

The only answer is to fall back on the basic risk management process using the five basic steps to manage risk:

  • What is the company’s risk exposure?
  • What is their mission statement?
  • What are their core values?
  • What previous positions have been taken?
  • Who are their customers?

The next step is to analyze the risk. The extent of the risk must be determined. Determine the severity and seriousness of the risk.

Next, assess the risk. Will the actions of the organizations provoke a short-term or long-term reaction? What will be the impact of doing nothing? What is the potential financial impact? What is the potential impact on the company’s brand?

Finally, address the risk. After completing the assessment, determine how to minimize the impact of the decision? Who is the communicator of the decision? What public statement is being prepared?

Finally, monitor and revise.

These are unprecedented times; therefore, as risk management professionals who rely on our risk management principles, it is essential to lead during these VUCA times. &


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