Page 44 - Banking Finance November 2025

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dered domains, where cause and effect are unclear or is Sense Categorize Respond where one has to priori-
unpredictable. tize efficiency and consistency.
On the right are Clear and Complicated: the ordered
domains, where cause and effect are either known or 2. Complicated
discoverable through analysis. Cause and effect exist in these cases but are not immedi-
ately evident. Expertise, analysis and skilled judgement are
Misjudging the domain can lead to costly errors viz. apply- required to reach a decision. Some examples can be evalu-
ing redundant practices in a complex scenario or over ating a corporate credit proposal or examining risk expo-
analysing a situation that requires quick action. Cynefin sure across portfolios. The response mode for these situa-
offers a moment to reflect before reacting. tions is Sense Analyze Respond where leveraging exper-
tise, frameworks, and diagnostic tools are the key.

3. Complex
In this quadrant, cause and effect are only visible in hind-
Complex Complicated
sight and the patterns emerge over time and require ex-
ploration. Think of launching a new mobile banking facility
for a selected section of the customers. Customer adoption,
Confused usage trends, and feedback loops are unpredictable here
and the response mode best suitable for such cases is Probe
. Sense Respond. Here, one should experiment, observe,
and adapt and must be ready for unexpected surprises.
Chaotic Clear
4. Chaotic
No clear relationship exists between cause and effect here.
One has to act quickly to stabilize the system. Situations
like cyberattacks, system outages, or sudden policy an-
Let us understand the five decision-making contexts with
nouncements from regulatory bodies that disrupt business
few practical banking examples for each.
as usual are few suitable banking scenarios where the re-
sponse mode required is Act Sense Respond, as per the
1. Clear (Obvious) framework.
Here, the relationship between cause and effect is straight-
forward. Best practices are known, and outcomes are pre-
dictable. Processing a standard cash transaction or updat- 5. Aporetic (Confused)
ing customer KYC details are some examples in which there It is when you are unsure which domain the situation be-
is a clear protocol to follow. The response mode suggested longs to. It may involve multiple elements and lack clarity.
Few examples are a newly appointed leader facing a dis-
oriented team, unclear reporting structures, and legacy
problem where the suggested response strategy is taking
a step back, gathering information and deconstructing the
situation into identifiable elements across domains.

Cynefin is not just a classification tool but it is a shift in
mindset. While banking traditionally leans toward control
and standardization, complex or chaotic environments de-
mand contextual awareness.

The framework urges us to ask:
Do I really understand what kind of problem this is?

40 | 2025 | NOVEMBER | BANKING FINANCE