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2020 | OriginalPaper | Chapter

1. Introduction

Authors : Dmitry Chernov, Didier Sornette

Published in: Critical Risks of Different Economic Sectors

Publisher: Springer International Publishing


There is an increasing trend towards the generalization of theories and solutions. Politicians try to impose political models and solutions—which may have worked well in some countries—in very different societies elsewhere. Management theorists take what they see as good practice from leading companies in one country and propose universal solutions to millions of other organizations worldwide. MBA programs train universal managers capable—on paper at least—of running any company.

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Loss of life; losses due to products that are poorly designed, or revealed later to cause illnesses and deaths; loss and disruption of business when hidden long-term health and environmental hazards are progressively revealed; losses due to unhealthy production practice endangering the health of employees; high costs for the cleaning/rehabilitation of contaminated or destroyed habitats.
Losses due to supply chain disruption, especially when a business is dependent on a small number of suppliers for key parts or components; loss due to environmental disasters, earthquakes, hurricanes, floods, landslides, pandemics…; losses due to changes of legislation or higher costs for risk mitigation following an accident (e.g. in the case of the Three Mile Island reactor meltdown); losses due to industrial failure of machines and infrastructure through aging, poor maintenance; dangerous siting, inadequate risk management, or bad luck; losses due to accidents in a given industry that affect the global public perception of that whole industry (e.g. nuclear accidents); loss due to electricity blackout in a region.
Loss of profits; loss of business due to competition; loss of market share due to disruptive technology; Loss of access or of market power due to changing geopolitics; loss of competitiveness due to changing regulations; losses due to liability changing with new regulation; failure to access a market due to political protectionism on grounds of national security, more stringent regulation, or opposition from local populations; loss of ownership due to nationalization; losses due to black market business or industrial malpractice revealed many years later, either within a firm itself or on the part of its suppliers/subcontractors.
Losses due to volatility in currency exchange and financial markets, impacting costs as well as cash management; losses due to interest rate changes impacting debt servicing costs.
Loss of reputation or public trust due to unethical practice: exploitation of ancient forests, child labor, extreme exploitation of workers in sweatshops, exploitation of animals, discrimination against specific groups such as LGBT, particular races or religions, etc.; losses due to sub-standard performance by employees leading to low quality products, or unhygienic conditions that later threaten the health or life of customers; losses due to employee error, incompetence, or psychologically unbalanced behavior; losses due to customer bad habits or mistakes that the company nevertheless has to endorse in order not to lose trust and market share; losses due to corruption charges; losses due to theft or counterfeiting; losses due to lawsuits and class actions.
Losses due to destruction by military or terrorist sabotage action; losses due to international sanctions; losses due to social disruption in a country, say due to a general strike; losses due to employee strikes and employer-employee conflicts; losses due to cyber-attacks and loss of control of a company’s IT system, losses due to sabotage by employees or external agents.
Some phone producers manufacture very reliable phones, which can work properly during many years but, unknown to the customers, they install special software in their phones, which makes them slow down so as to motivate customers to buy new more powerful phones with new features, just after several years of usage (Angelo Amante, Paresh Dave, Italian watchdog fines Apple, Samsung over software updates, Reuters, October 24, 2018)
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Dmitry Chernov
Didier Sornette
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