Sustainable Business Resilience
In the rush to return to normal after COVID-19, set aside some time to consider which parts of normal you are so keen to rush back to! Now is the time to discuss sustainable business resilience and the creation of a future-focussed approach to resilience and enterprise risk management.
The business disruptions caused by the coronavirus caught many organisations and CEOs by surprise. Organisations of all sizes have been stopped in their tracks as the pandemic spread across nations and sectors. The fortunate have retained trading, while others are still closed four months later. Several organisations rapidly terminated peripheral or low-income staff in their panic, while others sought to shed additional costs, disperse or furlough staff through home-working. Companies are now working irregularly from their regular business models, working with unpredictable supply chains pressures, reduced liquidity and seeking new ways to balance their business investments.
Some organisations will emerge re-energised by the challenge of COVID-19, others will have strengthened emerging business models, some will find themselves in dire economic peril, and a few will have successfully inflicted such self-damaging wounds to their reputation & brand in the eyes of their workforce (and customers) that they will never recover. Yes, business is tough and at times ruthless world, but how employers treat their people will impact on staff engagement, loyalty and innovation for years to come.
The new normal
The disruptove waves from the pandemic will continue for months, even with the risk of a second wave of infection, before social normality can be re-asserted. Currently, 1/3rd of the world is slowly coming out of some form of governmental lockdown! Business patterns have been disrupted, established strategic, and business continuity plans have proven to have limited effectiveness, and it is unlikely in some sectors that set ways of working and supply chains may never be re-established.
It is easy to be the CEO when times and business are going well for the organisation, but it is times like this that the disparity in wages justifies the salary gap. CEOs, their Boards and senior management teams are now under pressure bring their businesses back into a resilient and sustainable commercial fitness. Do you try and re-establish the past, Do you adapt to the current risk, or do you rebuild for future economic resilience?
How do you rebuild and prepare for an uncertain future?
Regardless of the external pressures, for organisations to have any chance of survival, they must re-assess what damage was inflicted within their marketplace, how their core mission and value proposition survived, and the strength of their organisational culture. Why culture? Because the resilience of your organisation lies primarily in your workforce, if they are no longer willing to engage in the enterprise or with your leadership, change and recovery is almost impossible. All three are closely tied up together and are three of the most reliable parameters in determining an enterprise’s vitality and commercial attraction. So ask yourself: How will I be judged by the way I treated our people during this challenging period?
Facing their workforce will be one of the first tasks all CEOs and senior leadership team members will meet on their return. The level of staff goodwill and future engagement will be a critical determinant in the organisation’s sustained survival and commercial vitality. Let’s be clear, without a robust organisational culture to drive the organisation forward over the next 12 months, few organisations at the brink of extinction will survive or redevelop their economic resilience.
So the first task after establishing underlying liquidity is not re-establishing past practices or amending your continuity management plan to include a belated chapter on ‘infectious diseases’. It will be to focus on your future strategy for sustainable business resilience and staff engagement!
What is Sustainable Business Resilience?
Sustainable Business resilience focuses on the leadership tier within organisations and their ability to:
- Rebuild the mission, mindset and purpose of an organisation after a crisis
- Display the leadership skills and traits necessary to bring an organisation out of an emergency or through a disruptive event.
- Apply the ‘softer’ leadership skills necessary to rebuild or repair employee confidence and re-engage with the organisation
- Lead organisations through post-crisis change management when there is no ‘return to normal’ business state.
- Anticipate and embrace future risks and megatrends through sustainability analysis
- Work to future proof long-term business resilience
- Utilizing transitional leadership skills and approaches
- Develop and maintain the leadership skills necessary to avert or manage the future crisis,
- Prioritization of future outcomes or system dynamics
- A watching brief on external trends as catalysts for future innovations
Why the added emphasis on Sustainability
Business resilience is widely recognised as a strategic risk management approach, which integrates an organisation’s policy, tactical and operational responses within internal plans tailored towards a real economic or operationally disruptive scenario.
Sustainability Business Resilience extends the focus further into the future. It enables a glimpse of emerging natural and human megatrends, allowing time for organisational leaders to build in new enterprise risk management strategies and preparedness. Do you wish now that you had more PPE stocks, a better IT platform for communication, alternative supply chains, that more of the business had transferred to on-line sales or even a more massive warehouse that allowed social distancing while working?
Sustainability management practices, such as megatrend analysis, seek to build in the risk from emerging tangible and intangible concepts. Concepts such as the rise of new competing technology, changes in social trends and preferences and the impact of future climate. They are seeking to highlight and bring to the Boardroom issues with the potential and likelihood for significant impact on an organisation’s long-term survival and competitiveness.
Reflect now how you would have felt six months ago, in a scenario in which a manager wanted to table a discussion on infectious diseases and the risk from a future pandemic on the business. Would you have given them a slot on the Board’s agenda? How much evidence would you have needed to consider the impact of a high impact – low likelihood risk? What would your reaction be now?
The two concepts of business resilience and sustainability combine well winto the broaderstructure of responsible business and risk management. They both target an organisation’s leadership skills and culture, seek consideration of long-term strategic planning risks, and can have a significant payback in terms of innovative development and growth. Critically they also encourage an organisational leadership group to adopt the accountabilities and responsibilities to consider the future, embrace change, innovation and risk adaptation and how they sit overall within the organisation’s culture.
What Intangible Business Risks?
All organisations face economic challenges from a wide range of external factors. Sustainable business resilience seeks to widen the scope of competitive, financial and physical problems through the inclusion of:
- Natural disasters (inc Climate Change)
- Social and consumer preference
- Economic disruption and market turbulence
- Organisational alignment with the United Nation’s Social Development Goals (SDG)
- Civil emergencies, strikes, and human rights
- Human healthcare & Pandemics
- Disruptive technological advances, inc Disruptive marketplace competitor models, and
- Materiality and scarcity within supply chains
The Future & Sustainability Business Resilience
How organisations emerge out of the lockdown is as crucial as the decisions they made entered into it. In the case of high street retailers, companies will have to consider their future strategy regarding coronavirus testing, the safeguard to staff and how to confidence booster customers to return to city centres and shopping centres. These are genuine CEO and Boardroom issues that will have to resolve. Do they resume economic activity as early as possible by re-opening their stores and what are the ethical consequences of doing so! If subsequent health screening pin-points their store as the loci of infection that resulted in a customer’s death. What price profit?
Do not downplay the risks that your business faces in its rush to resume normal trading relationships.
One of the critical lessons learned from History is that we do not learn from history. It is thus easy for executives to fall back into their established ways of working. Slowly sliding from executive leadership into a more short-term management perspective. The demands of the daily ‘emergencies’ that organisations face will not disappear. Still, organisations need to make mental space for considering how they deal with real emergencies. These events can topple even the most popular market brand at the height of their commercial success. Do you recall the market value crash of Kodak and Research in Motion (the makers of Blackberry phones) that failed to spot new disruptive entries into the market place such as digital photography and Apple’s iPhone?
Do you recall how Pacific Gas and Electric had to file for bankruptcy protection after climate-induced wildfires in California devastated its power networks and resulted in unsupportable liabilities? The growing panic within coal mining and power companies with coal-fired electricity plants as investors increasingly see their balance sheets as being full of ‘stranded assets’. For years the concept was regarded as hypothetical and abstract with their Boardrooms. Climate change adaptation was ignored, viewed as too far off for action, costly for investors and unregulatable. Globally trillions of dollars are still locked in stranded assets, as previously valuable infrastructure becomes a future liability.
Do you still rely on a predefined suite of KPIs (Key Performance Indicators) to assess business vitality or are you challenging the data and asking questions regarding performance and what underlying intangible growth trends are influential on the existing business plan or future growth trends?
Assessing the Hypothetical for Resilience
To start you on the journey of it may be useful to ask yourself a few hypothetical intangible questions that relate directly back to sustainable business resilience to review. These questions would be particularly applicable for manufacturing business, although some can apply to any business sector. I recommend that you consider these as a guideline, but also seek professional guidance to ensure you cover all intangibles for your business.
Sample Sustainability Resilience Questions
- Supplier Base: Can you guarantee access to the raw materials your business relies on and what factors will influence scarcity and supply?
- What is your information reliance on long-term customers, is it accurate, can newer customers feedback more critical marketplace information?
- What new revenue streams and questions are being picked up outside the Boardroom by the employees?
- Do the staff, particularly crucial workers, feel loyal and engaged with the organisation?
- IT Communications and on-line sales platforms – Have you ever tried to buy something on your website?
Taking Future Action
No list or set of model questions can ever be exhaustive, life and business move too fast for that to happen. Still, you need to ensure that some reflective and strategic time set aside to scan the future for business opportunities and risks.
Sustainability Business resilience management is an effective means of filling a blindspot within the mindset and actions of executive leadership groups. Given the lessons learnt and the lessons still to be learnt from the current coronavirus episode, business resilience and the future sustainability of the business both in environmental and economic governance terms will become increasingly vital management behaviour, which is why Leading Green recommend you sit down with experienced sustainability in business advisors who can help you brainstorm what future trends and risks need to track on your organisational early radar warning system.
You do have one I hope?
Sustainability business resilience integrates well within the broader suite of governance and risk management tools commonly applied within business leadership.