In a world where risk is becoming increasingly unpredictable and companies must manage risk by testing policy limits, resilience is emerging as a business-critical strategy. A company's resilience stems from its risk management strategy and operations efforts through "Black Swan" events, meaning they must know how to mitigate damage and recover from them.
While risk management and resilience are linked and apply equally to threats like cyberattacks and global viral outbreaks, important distinctions exist, and business professionals should understand how risk management works alongside resilience strategy. An advanced business degree, such as the University of North Carolina at Pembroke (UNCP) Master of Business Administration (MBA), equips graduates will the well-rounded, business education to handle challenges and react with durability.
On the one hand, risk management comprises identifying and assessing uncertainties, liabilities, technical issues and management errors that could threaten an organization's capital, earnings and market position. Conversely, companies also invest in processes that assess the risk of opportunities to take advantage of profitable ones and pass on those that don't make sense.
Resilience, on the other hand, is a forward-looking strategic approach to maintaining operations during crises and recovering from them. The COVID-19 pandemic put the resilience of governments and corporations to the test.
A McKinsey & Company survey asked senior executives and risk and insurance professionals to rate their organizations' strategic resilience preparedness during the lockdowns and to what degree that enabled continuity of corporate functions, including risk management.
Though the pandemic exposed weaknesses in operations and supply chain resiliency, the respondents "recognized that their crisis contingency plans were instrumental to managing through the crisis. Though the magnitude of the pandemic and its domino effects were not generally foreseen, the processes and procedures companies had in place proved themselves (or not) in very trying conditions."
Who Are Key Players in Risk Management and Resilience?
Developing effective risk management policies is part of resilience strategy, as the two go hand in hand. According to TenSix, building a strategy for risk management and resilience requires organization-wide collaboration and supply chain partners, as well as suppliers and B2B customers. The consultant calls out these key players:
- Executive leadership should be committed to risk management and educated on best practices for identifying and managing threats.
- Portfolio management officers are the starting point for the development of new risk management programs and their implementation.
- Project managers are tasked with ensuring newly implemented policies are followed, so there are benefits to including them on the development team.
- Suppliers and customers have their own risk management processes, and working with them during development can create synergy up and down the supply chain.
"Risk management can be abstract unless you work with your teams to implement the changes required to deliver on those benefits," it advises.
Strategic resilience, according to a Forbes Business Council article, requires planning for the "big picture" with the following strategies:
- Modeling end-to-end to understand how personnel, locations, equipment, IT services and data management contribute individually and collaboratively to delivery of products and services.
- Evaluating readiness to determine how prepared the organization is to prevent and effectively recover from crises.
- Testing plausible scenarios focuses on the most significant threats — cybercrime, for example, supply chain disruptions or economic crises — and isolates and mitigates vulnerabilities.
- Making strategic resilience an organizational core competency that promotes situational awareness and response, communication and recovery protocols.
"Across every industry and every business, resilience management capabilities are an important investment in ensuring stability in an uncertain world," the article concludes.
How Are Attitudes Toward Risk and Resilience Changing?
Business leaders who are prepared in a number of management, administration and problem solving strategies can anticipate and weather risk in nearly every sector. A survey of 1,000 senior executives in 10 industry sectors asked them to rate risks in four areas: technology, business, environmental issues and political and economic conditions.
The highest-risk, lowest-resilience business concern was supply chain operations; legislative and regulatory risk was the highest-risk, lowest-resilience concern in the political and economic arena. Otherwise:
- Of respondents, 85% rated the simple act of doing business as a moderate to high risk
- Of respondents, 37% named technology as their highest risk category; 33% rated business operations; 18% rated political and economic instability; and 12% said environmental concerns, including global health issues
- Cybercrime ranks as the highest risk in the technology category, but less than half of the respondents said their companies were "very prepared" to manage it
"Unsurprisingly, there are wide disparities in how resilient different sectors feel to risk, with the force of the pandemic likely to be a key influence on current states of mind," a survey analysis published by Continuity Central concluded.
An advanced business degree will prepare graduates to bring problem-solving and critical-thinking skills to their professional work with resilience at the forefront of strategy. UNCP's online MBA program will prepare graduates to "examine the nature of human behavior, organizational structures and processes, the impact of financial decisions, and the essential elements of international business" in any industry.
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