Subjectivity and Impacts

The problem of achieving objectivity applies just as much to assessing impacts as it does to gauging probabilities.  It can be difficult to establish a basis for comparison, praticularly in the area of 'soft' impacts.  As with probabilities, the key is to express impacts numerically.  The commonest way to do this is in financial terms.

'Hard' impacts often lend themselves to quantification and comparison, making it relatively easy to express them financially.  For example, an interruption to the operation of a production line resulting from a power cut or a fire could be translated into likely impact on revenues or profits.

'Soft' impacts are much more difficult to quantify, but they can still be hugely significant for the business.  For example, falling revenues may result in disillusionment within the business - a negative cultural impact.  This may result in talented individuals leaving the business, which could lead to a self-perpetuating cycle of decline (a strategic risk).  Quantifying impacts financially helps to express the significance of 'soft' impacts in terms that everyone can understand, putting them on the same basis of credibility as 'hard' impacts.

As with probabilities, complexity also adds to subjectivity:

• range of impacts:  impacts can affect many different areas of the business, making it hard to gauge the total impact.
• interdependence:  one impact may result in another impact in a different area of the business
• lack of precedent:  the situation may be unprecedented, or the precedent may be far in the past, making it difficult to assess the likely impact today.