In long-lasting periods of calm, it becomes hard to justify investing in crisis management. Scientists warned of a potential global pandemic for a while, but many businesses were still caught off-guard when Covid-19 emerged. Ill-prepared to limit the business damage and bounce back.
As the dust settles, there is growing recognition that the future could hold more critical events. That it’s not a question of ‘if’ a company will suffer a major disruption but ‘when’.
In response, the role of the Chief Resilience Officer has emerged to take a holistic approach to risk management. It is their responsibility to create plans that will minimise disruption and increase the speed and extent of the recovery.
The need for resilience
Boston Consulting Group (BCG) found that “performance during periods of crisis has almost three times the impact of performance during periods of stability.” In addition, BCG found that in any given industry, shareholder returns were similar in stable periods but significantly differed during a crisis. More resilient companies recorded lower impact and higher speed and extent of recovery.
Despite this, many businesses still view risk from departmental silos. Resilience tasks are often divvied up between CIOs, CHROs and COOs, amongst others. No one has a holistic view or a specific remit to foster resilience.
Organisations and their supply chains are becoming increasingly complex. In a globalised world, businesses will undoubtedly face disruption. McKinsey estimates that supply chain disruptions lasting a month or more happen every 3.7 years on average. This can be down to anything from geopolitical power shifts to climate change or the rise of new technologies. However, the critical event at the forefront of mind for many people is the Covid-19 crisis.
The lasting impact of Covid-19
EY’s Global Board Risk Survey, published shortly before the pandemic, found that boards were ill-prepared for the impending crisis. Only 21% of boards thought their organisation was prepared for an adverse risk event from a planning, communications, recovery and resilience standpoint. The result of this is still being felt by many companies today.
Since the pandemic, ‘resilience’ took on greater meaning. Before, a buzzword for IT disaster recovery and local disruption. Now, recognising the strategic advantage that comes from working “resilience principles into the leadership, culture, people, processes and infrastructure of an organisation.” (Gartner) Enter the Chief Resilience Officer.
The role of the Chief Resilience Officer
BCG defines resilience as “a company’s capacity to absorb stress, recover critical functionality, and thrive in altered circumstances.”
Increasing this capacity is the remit of the Chief Resilience Officer and their team. They must combine risk management with innovation and sustainability to allow companies to be agile in the face of disruption.
To do this, companies need to understand the complexities of their corporate ecosystem. The CRO needs to bridge departmental divides and implement coordinated action across the business. They must make processes and decision-making frameworks to ensure that the company can adapt to disruptive events quickly and decisively. Finally, they must work with other executive leaders to foster resilience in all areas of an organisation.
CRO: Chief Risk Officer or Chief Resilience Officer?
At this point, it’s worth noting the differences between the two roles vying to adopt the CRO mantle. At first glance, these may seem the same. Both focus on risk management, and their roles cross over to a degree. EY even suggests that Chief Risk Officers should become Chief Resilience Officers. However, there is a crucial difference.
Chief Risk Officers focus on risk avoidance, focusing on strategies and processes to avoid disruption as much as possible. Chief Resilience Officers accept that disruption is inevitable. They prepare plans and procedures to bounce back quickly and with renewed purpose once a disruptive event has occurred.
Building organisational resilience
Disruption will only become a more regular occurrence in an increasingly volatile world. Businesses that build organisational resilience into their strategy and structure will outperform their competitors.
The pandemic shifted the meaning of organisational resilience from focusing on technology and IT disasters to being a critical element of business strategy. Smart companies now understand that technology is an enabler but not the sole solution. True resilience must be baked into all areas of a business, paving the way for the rise of the Chief Resilience Officer.