The past three years have been a steep learning curve for business and successful organisations have learned that they must take volatility in their stride. Resilience means the ability to capitalise on the opportunities that arise from external threats, and as the impacts of global crises on markets become more frequent, more acute, and increasingly difficult to foresee, building resilience is ever more critical to managing risk.
Corporate resilience comes in many guises, and it forms part of the fabric of a successful business at every level. Here, we look at four ways to survive and thrive.
Maintaining sound capital and sufficient liquidity is always the first line of resistance against misfortune. Against a backdrop of increasingly interconnected and complex risks in 2021, the Federation of European Risk Management Associations (FERMA) and McKinsey & Company conducted a cross-sectoral, global survey on resilience, finding that financial resilience is still the most relevant for risk professionals and senior executives.
It’s a no-brainer that organisations must strive to maintain a bottom line that can absorb unpredictable shocks. Capitalising on these shocks, however, demands a combination of next-level financial resilience and organisational agility. Think Amazon, Alibaba and Zoom, all of whom were able to pivot, and even profit, from global challenges arising from the pandemic that many companies didn’t survive.
These companies generated efficient, targeted growth, achieving value through a concerted approach to capital allocation. They had a united leadership that enabled dynamism while pursuing consistent growth priorities. Now that’s financial resilience at its most impressive.
A strong culture means employees want to stay and be part of the organisation. Such businesses have integrity – they can recruit the best talent, supporting a firm’s ability to adapt quickly to changes in circumstance.
Organisational resilience refers to the ability to anticipate and adapt to short term shocks like environmental catastrophes or sudden changes in supply or demand. Responding constructively to diverse threats requires a culture of proactivity, organisational flexibility, and the right technology.
“Organisational resilience means consistency, and company culture is critical,” says Michael Evans, Managing Director of advisory firm Newport LLC. “A strong culture means employees want to stay and be part of the organisation. Such businesses have integrity – they can recruit the best talent, supporting a firm’s ability to adapt quickly to changes in circumstance.”
Also, a resilient firm will harness available technology to enable decision-makers to capitalise on real time data and on-point analytics. For example, in times of crisis, firms may have to find other sources of materials or reroute a delivery when a better option arises.
“Combine the right tech with the structural and cultural agility to optimise operations at short notice and you’re one step closer to thriving when others may fail,” says Evans.
A business’ reputation can be both its greatest asset and its greatest liability. Reputational resilience is when a company’s purpose is seen to reflect the aspirations of the customers it serves and the society it’s part of. It starts with a deep and strategic understanding of an organisation’s values, as well as customer, community, and stakeholder expectations.
“Managing risk used to be something that took place in the finance department, and you tended not to look to the future,” says Evans. “The modern-day resilient company has people dedicated to looking to the future from far more than just the financial perspective.”
Reputational resilience and organisational resilience are intrinsically linked. For example, in 2011 the Fukushima disaster severed car manufacturer Toyota’s supply of semiconductors, not only massively disrupting operations, but also threatening the brand’s emerging reputation for industry-leading efficiency. Toyota responded proactively with a business continuity plan that ensured a stockpile of chips and, when the pandemic crippled global supply chains a few years later, the manufacturer notably sailed through the storm.
Public – and stakeholder – perception was that Toyota could continue to serve customers even in a crisis, efficiently, reliably, and better than the competition. In strengthening its organisational resilience in response to one crisis, the firm reinforced the reputational resilience that would help see it through another.
Change can signal devastation from a survival perspective. But it can also signal opportunity. So, to thrive, we must learn to be comfortable in the uncomfortable.
“Emotional resilience requires a combination of situational awareness, cognitive flexibility, resourcefulness and decisive leadership,” says Director of Psychology for the Workplace Mental Health Institute, Emi Golding. “It’s worth investing in expert help to cultivate a workforce of strong, capable people who are ready to cope when times get tough,” she adds.
According to the WHO’s pre-pandemic research, every dollar spent on employee well-being is earned back fourfold in retention and productivity. “But it’s far higher than that in some industries,” says Golding. “If this is how critical it was pre-pandemic, imagine the impact after the loss and upheaval post-pandemic.”
Emotional resilience is key to mental health, but it doesn’t mean spoon-feeding employees, adds the expert. “Like physical fitness, in order to build emotional resilience, you might need to push yourself,” she says. Golding finishes with an insight that could serve as a mantra for resilience in all its powerful forms.
“Change can signal devastation from a survival perspective. But it can also signal opportunity. So, to thrive, we must learn to be comfortable in the uncomfortable,” she concludes.