Strength and flexibility build the foundation of resilience. Yet for businesses, strength and flexibility are just half the story. To become truly resilient, businesses must be able to assess and manage risk. Resilient organizations do more than recover; they become even stronger.
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WHAT YOU NEED TO KNOW
Manage risk to foster resilience
An organization that is not resilient remains vulnerable to disruption. Extreme events can cause downtime for the enterprise and delays for its customers. The company is likely to lose revenue or lose out to its competitors.
Risk-aware companies can anticipate imminent danger as well as less immediate threats. Identifying where risks are present lays the foundation. Enterprises can then proactively mitigate the worst effects – in some cases, even prevent risk events from happening.
For example, preventive maintenance and safety training serve to prevent incidents and accidents. Properly managing hazardous materials reduces the likelihood of negative impacts. Avoiding supplier clusters in a single geographic area makes the supply chain more stable.
Achieving risk awareness and uncovering vulnerabilities also help businesses react faster to occurrences that are outside their control, such as natural hazards. Companies can minimize costs or losses and recover more quickly than the competition. This is why an organization’s resilience depends on its ability to manage risk.
Whether in health and safety management, product stewardship, production, operations or supply chains, all areas of an enterprise are more secure and resilient when they can identify, assess, monitor and manage risks.
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The five R’s of resilience
The concept of resilience can be associated with five R’s: recognize, resist, respond, reduce, recover. It is also useful to understand how these aspects relate to risk.
- Recognize: Uncovering risks is the first step to managing them. For example, when companies identify potentially unsafe process steps and introduce relevant safeguards, the likelihood of incidents goes down. Processes become more robust.
- Resist: Companies that have assessed the potential impacts of specific risks establish measures to withstand these types of occurrences. Thanks to this resistance, incidents such as cyberattacks do not disrupt operations, because the organization has strong firewalls to keep intruders out.
- Respond: Real-time information enables companies to react faster to incidents. Then, when unforeseen events such as wildfires or storms hit, enterprises with contingency plans can immediately begin mitigation.
- Reduce: Through advanced scenario-planning, businesses reduce disruption to operations. Because action plans are in place, everyone already knows what to do. Less disruption means less interruption. Consequently, reactive measures take less time and cost less.
- Recover: When adverse events occur, resilient operations restart quickly after the disturbance. By managing risk, enterprises suffer less damage and loss and can get back to work faster.
Finally, agility also contributes to resilience. Threats continue to evolve and new risks emerge. Climate-related events are increasingly severe; at the same time, cyber incidents, geopolitical uncertainty and economic volatility are escalating. Organizations can only withstand and recover from destructive events when they are prepared for changing circumstances.
WHAT YOU NEED TO DO
Build resilience in three steps
Digital tools and technology empower companies to adopt a comprehensive approach to anticipating threats and preventing negative impacts. Here are three key steps to building more resilience through risk management.
- Incorporate technology into your risk management strategy. Efficiently managing databases, supported by a cloud solution, serves to protect operations and supply chains. Automation offers speed and accuracy unmatched by humans.
- Integrate data into your systems. Embed risk information and data into all processes and operations in your company. Choose and implement a risk management system that is easy to use, readily accepted and accessible via mobile devices by employees on site.
- Collaborate with suppliers. Use a cloud-based network to build resilience across the value chain. With visibility into the sub-tiers, you can detect and mitigate incidents early, before they cascade into larger issues.
THE BENEFITS
Bounce forward
Resilient, agile enterprises build risk management into their processes, product design and operating models. Good risk management also never lets sustainability risks out of sight. These include risks to the environment through GHG emissions, for example, or relating to social aspects such as labor practices throughout the value chain. The resulting business continuity and reliability benefit the company’s reputation and the bottom line.
With risk-aware strategies in place, weathering adversity does more than enable companies to recover. As German philosopher Friedrich Nietzsche and countless other have said (and sung): What doesn’t kill me makes me stronger. Or, in the words of McKinsey authors, “Resilient organizations don’t just bounce back from misfortune or change; they bounce forward.”
