Black Swan Risks


Bob Prieto

Princeton, NJ, USA

Much has been written on Black Swan type risks, sometimes treated as the risks from Unknown Unknowns. Do Black Swans inhabit the world of program management and are they truly Unknown Unknowns?

In 17th century Europe all observable swans were white and by extension all swans were therefore assumed to be white. No non-white swan had ever been observed.

In the 18th century, however, black swans were discovered in Western Australia and that discovery undermined the statistics of swans to that date. Previously, the “risk” of a Black Swan was essentially nil but upon recognition that the improbable was not the same as the impossible the possibility of Black Swans became more likely.


What had changed that made Black Swans more probable? Simply put our perceptions were broadened. In this article we will look at large programs, what creates the possibility of Black Swans and what are some of the new risks we must pay attention to.

Possibility of Black Swans

Program Management is very much about meeting the challenges of scale and complexity. These challenges largely focus on the management of known knowns and known unknowns.

But large programs by their very nature move into a new neighborhood where previously rare unknown unknowns are more prevalent. In effect, large program risks grow in new non-linear ways. What causes this growth?

Simply put:

  • Scale and complexity move you into a new neighborhood where black swans may be more common
  • Scaling drives non-linear and non-correlated growth in risks
  • Complexity masks existing risks
  • Complexity creates new risks

So what are Black Swans?

First they are outliers, beyond the set of expectations we have about allowable “value.” They are outliers since we believe we have no past experience to suggest the possibility. I emphasize the word “believe” here since I will later suggest that there is a reasonable expectation that large programs are “neighborhoods” that Black Swans visit.


To read entire paper (click here)

Editor’s note: Second Editions are previously published papers that have continued relevance in today’s project management world, or which were originally published in conference proceedings or in a language other than English. Original publication acknowledged; authors retain copyright. This paper was originally published in the January 2011 edition of PM World Today. It is republished here with permission of the author.

About the Author

bob prietoBob Prieto flag-usa

Senior Vice President


Princeton, NJ, USA

Bob Prieto is a senior vice president of Fluor, one of the largest, publicly traded engineering and construction companies in the world. He focuses on the development and delivery of large, complex projects worldwide. Bob consults with owners of large capital construction programs across all market sectors in the development of programmatic delivery strategies encompassing planning, engineering, procurement, construction and financing. He is author of “Strategic Program Management”, “The Giga Factor: Program Management in the Engineering and Construction Industry” , “Application of Life Cycle Analysis in the Capital Assets Industry” and “Capital Efficiency: Pull All the Levers” published by the Construction Management Association of America (CMAA) and “Topics in Strategic Program Management” as well as over 500 other papers and presentations.

Bob is a member of the ASCE Industry Leaders Council, National Academy of Construction, a Fellow of the Construction Management Association of America, a member of the World Economic Forum Global Agenda Council and several university departmental and campus advisory boards. Bob served until 2006 as a U.S. presidential appointees to the Asia Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC), working with U.S. and Asia-Pacific business leaders to shape the framework for trade and economic growth and had previously served as both as Chairman of the Engineering and Construction Governors of the World Economic Forum and co-chair of the infrastructure task force formed after September 11th by the New York City Chamber of Commerce. Previously, he served as Chairman at Parsons Brinckerhoff (PB). Bob can be contacted at [email protected].