The Resilience Value Proposition

Written by Mark C. Turner CMIRM, Chairman of the Innovation Special Interest Group; Managing Director, Emsity Limited

Why is it that people are surprised by the occurrence of events which had not been considered previously?  Surely life is a series of unpredictable occurrences which you either learn from or are doomed to suffer.  How boring would life be if we knew exactly what to expect every single day?

So why is it that organisations are surprised when unforeseen events occur?  In my opinion, it should not be the Risk Manager’s (or any other member of an organisations) job to KNOW what will happen.  Rather, it should be their job to PREPARE for what MIGHT happen, and to do so within the constraints of the available resources.  There are several tools within a Risk Managers arsenal which can aid with this, and the most favoured of them all is the risk register.

However, to imagine that a risk register can ever be either complete or accurate is a fallacy.  As anyone who has ever invested in anything will have had pointed out to them: “Past performance may not be indicative of future growth, and you may lose your initial investment.”  Irrespective of how much knowledge you have managed to accumulate about previous circumstances, the conditions moving forward will NEVER be identical.  Butterflies flapping their wings in the Amazon may well impact on your best laid plans in ways hitherto unimagined.  You can never hope to identify all possible risks.

When it comes to assessing the risks which you have identified, in the absence of pure data, human speculation will abound.  Even the most diligent of risk professionals will record the impact and likelihood of an event with many shades of human bias and as yet unrecognised heuristics.  Even your peer reviewed Delphi considered opinions will remain just that, human opinion and subject to inaccuracy.

Be that as it may, it would be unwise to throw out your risk registers just because they are inherently inaccurate or incomplete.  The steps taken to create the register are more vital than the contents, and hopefully the lessons learned by the team creating it will not be wasted when the proverbial mess hits the fan.

Building Resilience in Uncertain Environments

If it is not the role of risk managers to predict the future events, then is it their role just to protect organisations from the potential consequences irrespective of where they come from?

The answer to this question obviously lies in determining if the consequences are positive or negative for the organisation.  Too often risk professionals are seen as ‘protectors’ against negative consequences, when they should also be seen as the ‘precipitators’ for beneficial events and positive consequences.  Either way, the role of risk managers should be to ‘prepare’ their organisations to both survive and thrive in an environment of uncertainty and change.

In order to achieve competitive advantage in uncertain environments it is necessary to develop a flexible and agile response mechanism which will enable the organisation to seize on opportunities, whilst being capable of responding positively in the face of adversity.  Such resilience to change is a lot easier to imagine than it is to measure.

By virtue of their continuing existence each organisation will have demonstrated a degree of resilience within the environment that they have operated in.  That does not necessarily mean that they will remain resilient as the environment changes.  The classic example is Kodak, who dominated the chemical photography world, and helped shape the new digital world without adapting to it.  Rigidity and unwillingness to change led to their downfall.  But how does an organisation know if it is prepared?  That is what we hope to learn in the coming months.

Innovation Special Interest Group Project

What measurements of resilience can you take now to determine if your organisation is prepared for its evolving environment?

How are your management teams increasing and preserving value through enhancement of organisational resilience?

What is the best way to sell resilience into your Board of Directors?

These fundamental questions are currently being asked by the IRM Innovation Special Interest Group (SIG).  Led by Dr. Rodrigo Souza, the team are conducting a survey and follow up interviews to determine just what constitutes good quality resilience management in the 21st century.  By the end of the project, the team hopes to be able to present back to the IRM membership some practical examples of how to determine the resilience of an organisation and to demonstrate the tangible and intangible value of embedding resilience into the culture of an organisation.

It is our ambition to make this investigation a multicultural one, and we are looking for support from Regional Interest Groups around the world to contribute to our survey and interview process.

If you would be willing to support our efforts, then please look out for the link to our survey which the IRM will be sending out shortly.  Alternatively, you can contact either Rodrigo or myself via the IRM membership pages.