Connections Matter

Risks are usually assessed and measured in isolation rather than as a matrix of interconnections and interdependencies. This is probably because it is simpler to do and to communicate. Also, mitigations tend to address a single risk or a single event that may have occurred, and may often ignore the unintended impacts of corrective action. This applies at the detailed process level within an organisation, but also at the strategic level.

The East India Company was granted a monopoly in 1600 of all English (later British) trade east of the Cape of Good Hope. And the company soon became very wealthy, or rather its officers became very wealthy, by creaming off the profits, racketeering and drug dealing (mainly opium to China). When these officers returned to Britain, flashing their wealth, they were referred to as “nabobs” (a term derived from the Urdu for an official of the Moghul Empire). The company records also showed that they spent quite a lot on bribing British MPs.

The company evolved from a mercantile corporation into an occupying power in India, Singapore and Hong Kong, and its private army exceeded that of the British army in size. When the company took over the region of Bengal in 1757, it took all the region’s tax revenues for itself. Its mismanagement/plundering of Bengal led to widespread famine in the once-rich region, and approximately one third of the population died as a result. The impoverished region could no longer support the high costs of the East India Company’s administration, and the company itself foundered.

The imminent failure of the company was a threat to the international financial system, so the British government intervened and bailed it out, however to fund it, they had to find additional sources of revenue. The solution that was decided on was to impose taxes on tea in North America through the Tea Act of 1773. This went down rather badly with the American colonists, starting with a group, dressed as Native Americans, boarding ships in Boston harbour and ditching the cargoes of tea into the water – an event known as the Boston Tea Party. And the rest, as they say, is history…

Data Source: “The Silk Roads” – Peter Frankopan; the Financial Times; Wikipedia

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