Anticipating 'black swan' events

Quoting from Wikipedia – ‘black swan’ events are those that come as a surprise, have a major effect and are often inappropriately rationalized after the fact with the benefit of hindsight.

It was in a meeting somewhere some time ago where someone remarked – “we aim to possess an analytical tool that will anticipate ‘black swan’ events and thus help us prepare to foresee & face the unforeseeable.” The lyrical quality of the statement and its oxymoronic quality was not lost upon many, including myself. While one can appreciate the sentiment behind wanting to be proactive and using analytical techniques to recognize patterns and any changes in them, it remains to be seen if analysis (no matter how powerful or fast or intuitive it is) can really predict ‘black swan’ events. After all, if one could predict ‘black swan’ events, they wouldn’t fit its very definition – would they!

In today’s era where terms such as ‘self-learning algorithms’, ‘big data techniques’ are being bandied about as the solution to every problem in any field, it is important to retain a neutral perspective of what powerful analytics can do and equally importantly what it can’t (at least as yet). While detailed analysis may suggest a pattern as well as deviations from the same, it is only the ‘last mile’ activity of manually following it up and looking for corroborative evidences that can effectively validate whether the pattern or the purported deviation from it was indeed a concern to be addressed or an opportunity to be grabbed. This probably holds very true in the field of auditing where analytical tools and techniques are being increasingly deployed.

Looking forward to hearing from you on your experiences of using technology in general and analytical tools and techniques in particular as a game-changer in auditing.