Be prepared for Black Swan Events – Army Chief

What’s in today’s article?

● Why in News?

● What is Black swan event?

● Key highlights of the speech of Army Chief

Why in News?

In an address at the Defence Services Staff College in Wellington, Army Chief Gen Manoj Pande on Monday called upon the force to be always prepared for ‘black swan’ events.

What is Black Swan Event?

• About
  • A black swan is a rare, unpredictable event that comes as a surprise and has a significant impact on society or the world.
  • These events are said to have three distinguishing characteristics:
    • they are extremely rare and outside the realm of regular expectations;
    • they have a severe impact after they hit; and
    • they seem probable in hindsight when plausible explanations appear.
• Origin
  • The black swan theory was put forward by author and investor Nassim Nicholas Taleb in 2001, and later popularised in his 2007 book – The Black Swan: The Impact of the Highly Improbable.
• Implications of Black Swan events
  • Disruption
    • Black Swan events can disrupt economies, industries, and societies on a large scale.
    • They can cause sudden and unexpected changes in financial markets, business operations, and everyday life.
  • Uncertainty
    • These events introduce high levels of uncertainty because they are difficult or impossible to predict using conventional methods.
    • This uncertainty can make planning and decision-making challenging for individuals, organizations, and governments.
  • Vulnerability
    • Black Swan events often reveal vulnerabilities in systems that were previously thought to be robust or resilient.
    • They expose weaknesses in risk management practices and highlight the need for greater preparedness and resilience.
  • Reassessment of Risk
    • After a Black Swan event occurs, there is often a reassessment of risk across various domains.
    • People and organizations may become more aware of previously overlooked risks and take steps to mitigate them in the future.
  • Regulatory and Policy Responses
    • In response to Black Swan events, governments and regulatory bodies may introduce new regulations or policies aimed at preventing similar events in the future or mitigating their impact.
  • Behavioral Changes
    • Black Swan events can lead to changes in behavior and attitudes as people and organizations adapt to the new reality.
    • This may include changes in consumer behavior, investment strategies, and risk management practices.
    • Examples: Few examples of black swan events include –
  • Terrorist Attacks on New York’s World Trade Center on September 11, 2001;
  • The 2008 financial crisis - This event was caused by a series of shocks to Wall Street due to the unraveling of subprime lending practices.
  • The COVID-19 pandemic - This global health crisis had significant repercussions on global economies and markets in 2020.
  • The dot-com bubble - In 2000, the valuation of many internet-based companies plummeted after a period of rapid growth.
  • Brexit - In June 2016, news of the British referendum’s decision to leave the European Union caught many by surprise. It caused the British pound to drop sharply to a 31-year low against the US dollar.

Key highlights of the speech of Army Chief

• Preparedness against black swan events
  • He called upon the force to be always prepared for ‘black swan’ events and “expect the unexpected”.
• Cautioned against weaponization of technology
  • He highlighted the weaponisation of technology, especially its extension across various domains – from information to supply chains.
• Importance of jointness among the three forces
  • He emphasised the importance of cross-functional synergy among the three services to effectively assess threats, articulate strategies, and respond appropriately within the national security framework.
• Expansion of warfare into new domains
  • He further delved into the expansion of warfare into new domains, including space, cyber, electromagnetic spectrum and information technology.
• 2024 as the year of technology absorption
  • He also shed light on the Indian Army’s ongoing transformative initiatives, particularly emphasising the forces’ approach in making 2024 the “year of technology absorption”.

Q.1. What is Defence Services Staff College in Wellington?

The Defence Services Staff College (DSSC) in Wellington, India is a defense service training institution that trains officers for the Indian Army, Navy, and Air Force. The DSSC was established in 1947 and is known for its academic excellence. It also trains officers from the Civil Services and friendly foreign countries, as well as selected officers from the Paramilitary forces.

Q.2. What is 2008 financial crisis?

The 2008 financial crisis, also known as the global financial crisis (GFC), began with a downturn in the US housing market. The crisis was caused by cheap credit and lax lending standards that fueled a housing bubble. As house prices began to fall, the share of borrowers that failed to make their loan repayments increased, leading to stresses in the financial system. When the bubble burst, the banks were left holding trillions of dollars of worthless investments in subprime mortgages. The failure of the US financial firm Lehman Brothers in September 2008 triggered a panic in financial markets globally.