Organisational resilience: The relationship with risk related corporate strategies
"Organisational resilience involves adopting corporate strategies to deal with environmental forces of increasing volatility, velocity and visibility. It is an emerging approach incorporating strategic leadership, culture, people practices and relationships to enable organisations to resist and react with agility to unforeseen disruptive threats, and reshape environments for growth."
- Volatility, Velocity and Visibility
- Our Organisational resilience research with the Australian Government
Volatility, Velocity and Visibility
Corporate strategy evolved in the second half of the 20th Century to enable organisations to achieve competitive advantage through improvements in efficiency, quality, and innovation in product and service design and delivery. Such strategies typically depended on relative stable environmental conditions that favoured planning approaches and provided predictable opportunities for revenue growth.
In recent times, we see three key forces that have caused leaders to question the efficacy of traditional corporate strategies, and to seek a new approach. These include the perception of increased:
- Volatility in economic and demographic environments
- Velocity in innovation and information; and
- Visibility into everything, including organisational behaviour.
Volatility is demonstrated by increasing uncertainty, emerging and expanding global markets, scarce resources, and an increasing dependence on complex system dependencies, networks and extended supply chains. Production systems increasingly designed to maximise efficiency can demonstrate a brittleness that makes them vulnerability to disruption.
Velocity means that customers are able to change their purchasing choices rapidly. Organisations need to be adaptive, responding to disruptive threats when they occur, and innovating products and services in a constantly evolving marketplace.
Visibility into everything is driven by the explosion in the popularity of social media and social activism. This has led to the increased vulnerability of brands to negative perception and loss of reputation.
Organisational resilience enables organisations to survive, and exploit opportunities presented by unforeseen disruptive threats triggered by the forces of increasing volatility, velocity and visibility. Traditional corporate strategies developed to promote corporate performance in relatively stable, benign operating conditions.
Organisational resilience seeks to avoid the extremes of a performance bias or protection bias. It goes beyond traditional planning to address the cultural and behavioural dimensions of sound corporate risk taking. And by intelligently applying controls that achieve optimal risk and reward trade off, while preventing catastrophic costly disruptions to business-as-usual, organisational resilience supports the productivity agenda.
Our organisational resilience research with the Australian Government
The same forces that impact the achievement of corporate for-profit objectives also impact the critical infrastructure vital to the good functioning and wellbeing of Australian society. For this reason, the Australian government established the Trusted Information Sharing Network (TISN) for Critical Infrastructure Resilience in 2001, with sector groups for Banking & Finance, Health, Food Chain, Transport, Communications, Water Services, and Energy. In 2010, it established the Critical Infrastructure Resilience Strategy.
As part of the Strategy, EY performed resilience research with the Australian Government. The resulting report, 'Organisational resilience: the relationship with risk related corporate strategies' was published by the Hon Mark Dreyfus QC MP, Australian Commonwealth Attorney-General at the Critical Infrastructure Resilience Conference in April 2013. The purpose of the research was to encourage awareness of, and commitment to, the organisational resilience approach within corporate organisations, including those responsible for critical infrastructure.
Insights from our research
Our research was based on our global practice insights and an extensive review of existing literature on organisational resilience. Through our research we were able to identify, and analyse, four key attributes of resilient organisations, including resilient leadership, networks, culture, and change readiness.
- Resilience leadership is the non-routine management styles that are required for consultative but decisive and rapid decision making during a disruptive circumstances.
- Resilience culture supports learning from failures, inspires vigilance and one-in, all-in mentality. It is often developed by creating a learning organisation.
- Resilience networks build on relationships with business partners and third parties. These networks are based on trust and can help an organisation survive disruptive threats.
- Change readiness refers to the wellbeing and preparedness of individuals within the organisation. Resilient people are committed to their organisations and proactive in protecting its interests.
Our research found that the value proposition for organisational resilience is context dependent and therefore different for every organisation. However, it complements traditional strategy, providing a superior capability for responding to both foreseen and unforeseen threats and opportunities.
Practical application of organisational resilience
Organisations will find value in performing a rapid diagnostic assessment of their organisational resilience current state and future state objectives. From an assessment of the resilience context both within the organisation and the external environment, it can identify gaps in the maturity of existing corporate strategies and management approaches. Ultimately, a resilience roadmap can be developed that provides a pathway to addressing resilience gaps and preparing the organisation for long term prosperity. EY provides a wide range of advisory services to help organisations achieve their organisational resilience goals.