Page 34 - Risk Management Bulletin April-June 2022

RMAI BULLETIN APRIL - JUNE 2022

using crisis scenarios to test for resilience in a Finally, as yet, we have no universal means of
downturn. Accordingly, foresight capabilities are used measuring resilience (we are working on it!).
to develop the scenarios; scenario-based modeling can Consequently, the efficacy of investments in resilience
then pressure-test strategies and business models tends to be based on qualitative judgements. Likewise,
through future volatile environments—such as those people are not trained in resilience, and performance
defined by economic downturns, rising geopolitical evaluation is not much based on it. Managers are
tensions, disruptions in the regulatory landscape, as promoted for expertise in pattern recognition and for
well as technological disruptions. Such an approach avoiding mistakes; however, resilience leadership
enables leaders to move beyond resilience capability requires creative thinking, first-principles problem
assessments to active strategic thinking to find new solving for navigating through disruptions, and a
opportunities and shape new business models. predisposition to learn from and adjust to crises and
downturns. A defensive stance and routinized thinking
will prevent the organization from pivoting and
Designing and implementing strategic
accelerating in the next upswing.
resilience
Companies have lately developed tools to deal with Robust steps toward building
the challenges of the COVID-19 pandemic, but the
“resilience muscle” must still be strengthened. Future sustainable resilience
disruptions will be different, and institutions need to Companies across industries have learned to
plan for the primary impact and also for second- and successfully navigate fundamental disruptions, emerge
third-order effects. Some of these knock-on effects stronger, and gain competitive advantage in tough
appear only after a long delay but then suddenly times. The following steps briefly sketch a path to
accelerate; others gather momentum incrementally overcome pitfalls while systematically building and
until an emergency tipping point is reached. strengthening strategic resilience. The steps are not,
of course, a simple how-to guide. Rather, each element
For a number of reasons, few institutions have built relies upon talent, capabilities, and deep commitment
sufficient strategic resilience. The goal of becoming a to the integrated effort.
resilient company can sometimes run counter to the Y Measure resilience and start to report it internally.
more immediate objective of value creation. Building Taking a business-model view, review resilience
redundancy in supply chains builds resilience but it also dimensions regularly and systematically,
increases costs, reduces returns on investment, and identifying strengths and weaknesses compared
thus can make resilience a tough sell to business with industry peers. The ability to conduct these
leaders. reviews is of critical importance to decision
making and balancing value creation and
Another barrier is organizational forgetfulness. resilience building.
Resilience is not needed every day; big disruptions are
Y Pick your disruptions. A resilience agenda built
not happening all the time. The importance of
around generic disruptions or overly specific
resilience can be forgotten between big crises. These scenarios is rarely useful. Instead, choose a
trigger big investments, but the next crisis will not
particular type of disruption to start with, then
necessarily be recognizable as a repeat of the last one. probe it deeply for expected initial impact and
Over time, the effort to achieve strategic resilience longer-term secondary and tertiary effects.
peters out and new leaders shift priorities.
Y Put less emphasis on extrapolations based on
Resilience as we have been defining it cannot be planning and budgeting processes. The approach
achieved in a siloed approach. Yet due to inertia and is too slow and narrow for our disrupted world.
biases, efforts to achieve a holistic resilience agenda Define instead a mechanism for creating scenarios
can begin to veer off course, back toward familiar systematically. Define increasingly disruptive
patterns. And siloed resilience efforts cannot scenarios across a widening circle and embed the
collectively achieve the integrated solution. impact of structural factors.

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