External Factor Fallacy
Paterson advises investigators to keep asking questions after identifying an external factor. Review how the organization assessed a dependency, assigned responsibility, monitored performance, and prepared for a failure.
THE IDEA
Practical Suggestions
- Never accept ‘external factors’ as a root cause, it will be an immediate or contributing cause.
- If you plan to do business in a new country, get expert input on the risks you will face from a legal, compliance and competition law perspective, best of all from an organisation with hands‐on experience in ‘cleaning up’ after problems.17
- Be mindful of the ability for things you thought you knew to change, so always pay attention to the last time you double‐checked things directly, in detail (e.g. via an internal audit or independent consultant review).
- Recognise that accountability and responsibility for managing a third party must remain in your organisation at a level commensurate for what is being done. Specifically, are you clear who monitors service level agreements (especially for your top suppliers and agents) and what the frequency and the rigour of supplier reviews should be and is?
- If a problem arises in the middle of the night, or during a public holiday, will managers in your organisation be able to contact the right people working for any relevant third‐party supplier, so they can help you?
- When was the last time key suppliers provided certificates of assurance over critical matters or when were they last audited? If audited, what was the breadth and depth of the review and were there any gaps or issues to be addressed?
- If your organisation engages in conferences and third‐party forums, clarify what information was shared, what valuable insights were obtained and what practical purpose these were put to? Discipline around the outcomes from such events will help concentrate the minds of those involved regarding the cost/benefit of these forums beyond general networking.
- Are there any areas where you are too dependent on consulting support? And are there areas you need to get a second opinion or build internal capability much more quickly?
When to use it
Evaluating new business partners or suppliers in unfamiliar markets.
Crisis management planning, including ensuring 24/7 contactability of third parties.
Auditing supplier compliance and certificate of assurance validity.
Assessing internal capability gaps to reduce over-reliance on consulting support.
FROM THEORY TO EVERYDAY LIFE
In practice
New Market Expansion
A company enters a new country without obtaining local legal or compliance advice and later faces fines. Calling unfamiliar regulations an 'external factor' leaves important questions unanswered: who assessed the risks, what advice was available, and how was compliance monitored?
Midnight Crisis
During a system outage at 2 AM, managers cannot reach a supplier because their contact information is outdated. Beyond noting supplier unavailability, the review examines responsibility for maintaining emergency contacts, escalation arrangements, and service-level agreements.
A MOMENT TO REFLECT
Put it to work.
When was the last time you accepted an 'external factor' as a root cause without digging deeper into immediate or contributing causes?
How do you ensure accountability for third-party actions remains within your organization, and who is responsible for monitoring service level agreements?
Are there areas where your organization is too dependent on external consultants, and what steps could you take to build internal capability?
Often confused with
CONTINUE THE CONVERSATION
Source texts
- Beyond the Five Whys Root Cause Analysis and Systems Thinking (James C. Paterson)