Defying the Precautionary Principle

What is the Precautionary Principle?

If we look it up on Google, we find literally thousands of sites explaining the concept. Not that it's something new or revolutionary - remember the old saws advising you to "look before you leap" or "better safe than sorry" (or my personal favorite, "don't run with scissors").?

Originally, the Precautionary Principle was drafted to address response to Environmental issues, where long term effects are unknown, and decisions are made in an atmosphere of uncertainty. However, the guidelines are applicable to a wide range of human activity, especially in the industrial/business world. For a better definition, please refer to Wikipedia.
http://en.wikipedia.org/wiki/Precautionary_principle.

In the current business environment, where Organizations are forced develop detailed plans for contingency management in order to ensure their continued existence, the Precautionary Principle has many advocates, especially among those who define Risk in terms of anything that has the potential to disrupt normal Organizational activities.

This broad application gives rise to a very large "gray area" where we find the Precautionary Principle being applied to every situation that has uncertainty, even those that constitute the "normal" risks of doing business. Applying the Precautionary Principle strictly leads to ultra-conservatism, and an unwillingness to either participate or support any action that is viewed as being "risky".

Essentially, the principle of precautionary action has 4 parts:

1. People have a duty to take anticipatory action to prevent harm.

2. The burden of proof of harmlessness of a new technology, process, activity, or chemical lies with the proponents, not with the general public.

3. Before using a new technology, process, or chemical, or starting a new activity, people have an obligation to examine "a full range of alternatives" including the alternative of doing nothing.

4. Decisions applying the precautionary principle must be "open, informed, and democratic" and "must include affected parties."

What does this mean? What the Precautionary Principle is advocating is - PLAY IT SAFE.

In other words:

No breaking the rules - standards and processes are sacred.

No pushing the envelope - establish "nominal" values and make sure that everything falls within acceptable range.

No newfangled technologies - nothing but tried and true stuff.

No explorations - don't even think of going off and trying out anything that isnt in the books or expressly endorsed by Organizational policy.

No quick direction changes - exhaust all options available before changing direction, even if it means wasting time going down unfruitful avenues. Better to be sure we aren't missing anything.

Make decisions by Committee - consensus is all important.

While Conservatism is welcome, we should not confuse pusillanimity with discipline. An organization that has a clear sense of what it needs, and follows a carefully considered path to achieve its goals is conservative and disciplined in its approach. An organization that wavers endlessly because of its leaderships inability to make decisions or commit to a course of action is just plain pusillanimous.

Ergo - no innovation is encouraged. Just tried and true stuff, solid and dependable. And oh, yes.. Stick to what's known, follow the rules, adhere to the standards, and make sure you run everything by the everyone else. Also known as designing by committee.

Everyone loves the Precautionary Principle. Governments, Militaries, Corporations, Universities, Organizations, you name it… No one ever got fired for following the maxims advocated by the PP. Honestly, it is a wonder that creativity and innovation exist at all.

However, if you think about it... it makes sense, in a way. The entities that are most likely to follow the Precautionary Principle are the ones that have the least history of innovative thinking. Creativity abounds in Individuals and Entities that defy the Precautionary Principle, so the most innovative ideas come from these small islands of rebels - but they do not always have the proper access to funding and other resources, they are likely to be bright flashes that shine briefly and die out.

Organizations know this - most Organizations will tell everyone who will listen that they love innovation and creative thinking, but they will also acknowledge that they cannot afford to run the financial risk of committing the whole Enterprise to defying the Precautionary Principle.. They have obligations to their shareholders, customers and employees and to the community as a whole.

Once in a while, an Organization that wishes to stand out, blow its competition away, or at least make a run on it's competitors market share will be willing to get out on a limb and make decisions that defy the Precautionary Principle - they usually do this by going out and hiring an outside consultant who has a reputation for being "with it" or " in tune" with whatever market the Organization is trying to tap into.

Even here, they are forced to apply due diligence to ensure that the "specialist" team picked can work within the framework of the Organizational constraints, and that they will be able to deliver a workable solution within the timeframe and budget dictated by Business requirements.

The conservatism is understandable - there is simply too much to lose. But on the other hand, we cannot even begin to fathom what there is to be gained. Of course, for an organization that has has a specific role, and will not seek to look outside its market boundaries, defying the Precautionary Principle may bring impovements in productivity, but these may be offset by the costs associated with the risks assumed by the organization.

So, where does this leave us? Are organizations doomed to look outside of themselves for true innovation? Is this the fate of all Organizations that attain a particular size, or commit themselves to public scrutiny?

I mentioned Google earlier in this article… Google is an organization that is seen as creative and innovative, but they are now a publicly held company, and as such, responsible to their shareholders now. Gone are the days of free-thinking design radicalism - they will have to adopt and apply the Precautionary Principle like anyone else. Not that the company's leadership wants to do so, they are forced by market forces to comply with the the Principle. How far they want to conform is still up to them, of course.

There are lots of Organizations that may not define risk quite so conservatively, and have a system of prioritization that allows them to assign specific costs associated with adopting or choosing not to adopt a particular course of action… this prioritization, when done in a fair manner, allows for a lot of flexibility to evaluate new processes, technologies and even philosophies in a controlled manner, while still managing the potential for catastrophic failure or loss within the Organizations acceptable limits.

The ideal environment in which to "defy" the Precautionary Principle would be in a large company with the depth of resources, both financial and people, but one that is not continually subject to public scrutiny for every decision it makes. Such a company would have forward-thinking leadership, and a good sense of where it needs to be at different points in the future with respect to its competitors and the marketplace in general.

Companies that have a track record of innovation usually also have taken pains to set expectations from their customers, and the marketplace, that their forays into unknown territory are absolutely necessary to continue their current successes. Due to the setting of expectations, Risk in such a company will arise from NOT undertaking research into the unknown.

I am sure some will ask "But what about Wall Street? What about Analyst expectations"??

Personally, I am not entirely convinced that analyst expectations are a bad thing. Expectations for continued growth in revenues it deter a company from taking unwonted risks, but may also spur the leadership to look for ways to increase revenue by exploiting hitherto untapped channels.span>
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copyright 2004 ajoy muralidhar. all names, websites and brands referenced are the copyright/trademark of their respective owners.