Airmic research finds five principles underpin business resilience

In Airmic's Roads To Resilience report, published this week, the association said companies that create resilience throughout their organistion are more likely to be successful in the long term. Its authors urged boards and business leaders to challenge prevailing attitudes towards risk management and recognise the discipline as a strategic priority rather than simply an operational or compliance issue. Risk managers must complement the board in this process and develop the necessary skills to fulfil the broader remit that this demands. The Roads to Resilience report examined eight leading organisations that have dealt with significant uncertainty but emerged in one piece at the other end. Cranfield interviewed senior staff with risk management responsibilities, including CEOs, and found common principles of an organisations' resilience.hideKnown as the five Rs these are: Risk radar-the ability to anticipate problems before they develop. By seeing things in a different way, not only will a company develop an early warning system, it may also identify new opportunities Resources and assets-that are well diversified, providing the flexibility to respond to opportunities as well as adverse or changing circumstances Relationships and networks-that enable risk information to flow freely throughout the organisation up to directors to prevent the 'risk blindness' that afflicts many boards Rapid response-to ensure that an incident does not escalate into a crisis or disaster and that people and processes are in place to restore things to normal as quickly as possible Review and adapt-the ability to learn from experience and make the necessary changes so that every adverse event or circumstance is identified, analysed, evaluated and improvements made to strategy, tactics, processes and capabilities According to the report, organisations must display all five principles in order to achieve resilience. The report revealed that the qualities embedded in resilient businesses enable them to succeed in other areas. They are more responsive to their customers and the markets they serve, their staff and suppliers are motivated and loyal and they gain trust by being more dependable. The research also identified four 'business enablers' that are central to an organisation's ability to create a dynamic and holistic risk management approach. These are leadership and governance, people and culture, business structure and tactics and operations. "Whilst all organisations have these enablers, in some organisations they are better developed than in others. As with every aspect of resilience, the board must take responsibility and provide leadership by setting the tone from the top, such that each business enabler supports the resilience agenda," say the report's authors in its executive summary. To achieve organisational resilience the report stresses the complementary roles that needed to be played by boards and risk managers. The board provides strategic leadership, sets the tone and establishes the governance structure. The risk function must then work closely with operational management to create an effective framework and culture within which the organisation can achieve resilience, says the report. This requires both the technical expertise traditionally provided by risk managers and also a 'committed style of leadership' to ensure that all levels of an organisation are fully engaged in this process. "Although technical resilience expertise will continue to be essential, it is just part of the picture; softer skills such as communication are also essential," says the report. It concludes that risk managers have a vital role to play in driving resilience, implying a broader remit than has traditionally been the case. "They (risk managers) have to decide where they aspire to be in this broadened risk scenario and identify the wider business skills required to play a leading role," it advises. John Hurrell, Airmic CEO, commented: "This report will help companies avoid catastrophe by learning from those who are leading the way in creating resilient organisations. Whilst traditional risk management techniques remain important, their role should be to support the board and senior leadership to foster a sustainable culture of enterprise. The research highlights the need for boards to take ownership of their risk agenda in order to develop a culture of resilience throughout their? organisation going way beyond risk compliance." Keith Goffin, Professor of Innovation at Cranfield School of Management, who co-authored the report, added: "For boards the incentive to put risk management at the heart of their strategy goes well beyond merely avoiding disaster. Our research shows that companies that are more adept at recognising and dealing with risks also have the ability to take advantage of opportunities-the positive side of risk." While the report deliberately shies away from telling boards exactly how to proceed, it identifies eight hallmarks usually found in resilient organisations. It stresses that organisations should: Raise risk awareness, with relevant lead and follow indicators to identify trends, emerging risks and opportunities Avoid board risk blindness, by encouraging the sharing of information and bringing uncomfortable truths to senior management, so that board decisions are well informed Develop risk architecture, including involvement of representatives from the supply chain, contractors and business partners to evaluate risk exposures Plan crisis management and develop crisis management teams, separate from normal management, to be activated at pre-determined trigger points Determine risk attitude and develop risk appetite positions for each of the main types of operational risk for the guidance of managers Undertake risk assessment by developing a dynamic approach, so that the risk register becomes more than just a list of risks Establish resilience agenda, including a board mandate to increase resilience and protect the reputation and brands of the organisation Ensure risk governance, by establishing an appropriate version of the 'three lines of defence' model to provide proactive assurances for the board Roads to Resilience was based on the study of AIG, Drax Group, InterContinental Hotels Group, Jaguar Land Rover, Olympic Delivery Authority, The Technology Partnership, Virgin Atlantic and Zurich Insurance. It is sponsored by PwC, Lockton and Crawford. It follows the Roads to Ruin report, published by Airmic in 2011, which looked at high-profile crises that left the reputations of 23 companies in tatters.

Airmic research finds five principles underpin business resilience

Want to read this article?

Read Next

Index finds European organisations failing on diversity equity and inclusion

Costs triple to outpace premiums for Europe’s insurers in 2023

PoloWorks launches MGA incubator

Time for risk and insurance managers to shine: Natividad

Brazilian floods put focus on risk prevention failures as climate change hits

Index finds European organisations failing on diversity equity and inclusion

Costs triple to outpace premiums for Europe’s insurers in 2023

PoloWorks launches MGA incubator

Time for risk and insurance managers to shine: Natividad

Brazilian floods put focus on risk prevention failures as climate change hits

Want to read this article?

Read Next

Index finds European organisations failing on diversity equity and inclusion

Costs triple to outpace premiums for Europe’s insurers in 2023

PoloWorks launches MGA incubator

Time for risk and insurance managers to shine: Natividad

Brazilian floods put focus on risk prevention failures as climate change hits

Related Articles