Resilience reimagined

In business, change is unavoidable.

Consumers alter their preferences, regulators rewrite the rules, and competitors innovate. These variables are working assumptions for executives when considering strategy and planning, product development and business continuity. But even against this backdrop of recurring volatility, unforeseen events will shake business’ foundations in more profound ways. War, natural disasters and pandemics, circumstances beyond the control or influence of an organisation, require a different kind of preparation and response. In such conditions, leaders must be able to adapt their operations so that business can continue as close to normal as possible, or at least ensuring minimal disruption.

Enabling this requires pre-emptively incorporating a suite of capabilities before a trigger event occurs. These include having the capacity to diligently scan the horizon, anticipate coming shocks, and implement measures to minimise the impact. They also include quickly adapting procedures to meet new circumstances, such as increased attention to employee wellness and reorienting the organisation for success in a potentially altered environment.

These capacities are described collectively as organisational resilience. Organisations can do well for years with weakened resilience if no shocks emerge. Indeed, a critical element of resilience is resisting the complacency that such stability can create. But such periods of stability do not always last, and every organisation will be threatened by shifting conditions beyond its control at some point in time.

Episodes of instability have arisen with increasing frequency over recent decades. While world trade initially deepened globalisation, a backlash among segments of society that lost out has slowed the trend more recently. The accelerating rate of innovation in digital technology has given rise to new products and services, creating new business behemoths that dominate entertainment, retail and business services and fundamentally affecting virtually every person and organisation globally. Climate change, a fringe concern just a few decades ago, has come to the forefront of public concern, propelling the drive to decarbonise our economies while business losses from extreme weather events are growing. Quantifying the impact, Swiss Re, a global insurance company, reports a 20% increase in extreme weather losses between 2020 and 2021, to US$260bn.

Most recently, the pandemic disturbed organisations from continent to continent in a matter of weeks in early 2020, bringing one economy after another to a virtual standstill. Since the second world war, nothing has disrupted commerce or social services on this scale.

The Economist estimates the losses in 2020 and 2021 alone at US$10.3trn, equating to about 12% of global GDP. The pandemic pushed organisations to their limits—and in many cases beyond them—by massively disrupting linkages with suppliers and distributors, isolating consumers from physical outlets for goods and services, shutting down offices and other facilities and leaching the economy. It demonstrated that anticipation, preparation and adaptation are crucial to survival.

Managing risk has been a core function in business for centuries. Organisations have designed action plans to offset the damage. But in today’s increasingly interconnected and technologically mediated world, this often-piecemeal approach—identify risk, plan mitigation—is no longer enough. Organisational resilience offers a broader and more effective approach. Resilience requires a whole-business perspective: not only analysing every business function, but the interdependencies between them as well. Like any complex system, a business is not an isolated set of autonomous functions but a web of relationships contingent on each other. A failure in one part of the business can cascade through the whole system, causing catastrophic damage. Building resilience means involving every aspect of the organisation in a coordinated effort, with clear and constant communication.

The study

Economist Impact conducted an in-depth research programme sponsored by Iron Mountain in early 2022. It included expert interviews and a bespoke survey of 611 senior executives across four major regions (North America, Latin America, Europe and Asia-Pacific) in four highly regulated sectors: financial services, healthcare and life sciences, energy, and the public sector.

The study aims to present a clear point of view on how and why organisational interpretations of resilience are changing and provide guidance on how to plan, build and maintain a global business in the post-pandemic world.