5 minute read 16 Jun 2023

Businesses are struggling to thrive in times of extreme uncertainty and complexity. How can your enterprise build resilience as a capability?

Drone view above a road through a forest at night

How businesses can stand the test of time

Authors
Tonny Dekker

EY Global Consulting Enterprise Risk Leader

Excited to serve as a Global Client Service Partner with over 25 years working to transform the businesses of our big Global Clients. Straight-talker with a big heart.

Maurice van der Sanden

EY EMEIA Risk Consulting Enterprise Resilience Leader

Transforming risk management through technology. Hands-on collaborator interested in the details. Husband and father. Enjoys time with family and friends, ideally over a good meal. Global citizen.

5 minute read 16 Jun 2023
Related topics Consulting Risk
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Businesses are struggling to thrive in times of extreme uncertainty and complexity. How can your enterprise build resilience as a capability?

In brief
  • Newer and unknown risks are emerging at a speed never seen before, and “polycrises” threaten business as usual from multiple directions.
  • Shifting from continuity to resilience capabilities can help you turn any risk into an opportunity to create value.
  • A combination of new mindsets, analytical technology and human judgement can help build resilience throughout the enterprise.

The average lifespan of a US S&P 500 company used to be 67 years. Now it’s 15.1 And it is expected to shorten further if large organizations do not take appropriate resiliency and sustainability measures.

Many of the longest-lasting of these companies share an ability to effectively anticipate, prepare, respond and adapt to change whether through product evolution, diversification or acquisition. But today that’s no guarantee of survival.

Average lifespan of a US S&P 500 company 80 years ago

67

Years

Average lifespan of a US S&P 500 company today

15

Years

Business leaders today are rightly worried about a whole host of threats. For example, a recent EY survey of CEOs identified multiple threats to growth, including pandemic-related supply chain disruptions, uncertain monetary policy direction, higher input prices and inflation and increasing cybersecurity risks. Some of these pose a threat not just to growth, but existence. 

How do you equip yourself for all these eventualities?

The key is having the organizational capability and willingness to adapt and reshape the organization to changing environments to build resilience and deliver sustainable long-term value to your stakeholders.

From continuity to resilience

Many enterprises focus on maintaining business as usual by tackling the individual problem or disruption.

But over the last few years, leaders have become more aware of interdependence, both within their organizations as well between external events. A problem in one seemingly isolated area can have much wider ramifications.

In the World Economic Forum’s (WEF) Global Risks Report 2023, the authors identify that “Concurrent shocks, deeply interconnected risks and eroding resilience are giving rise to the risk of polycrises — where disparate crises interact such that the overall impact far exceeds the sum of each part.”2

The war in Ukraine has demonstrated how crises can have wide ramifications. Few organizations anticipated the extent of instability, from energy prices to food availability, that would unfold over the months since it began.

And there are more potential polycrises on the horizon. For example, the WEF anticipates “interrelated environmental, geopolitical and socioeconomic risks relating to the supply of and demand for natural resources.”3

This underlines the need for a shift from business continuity to enterprise resilience — building a predictive approach to anticipate unexpected emerging threats, opportunities and trends through “intelligent” horizon scanning, anticipation, improvisation, innovation and adaptation as key capabilities.

How EY can help

Enterprise Resilience

Navigate disruptive events with agility while minimizing risk and preserving trust, with help from our Enterprise Resilience solution.

Read more

  • Case study: EY teams and IBM’s Scenario Planning Advisor

    EY teams and IBM Research demonstrated the value of predictive enterprise resilience several years ago in Scenario Planning Advisor (SPA) studies. SPA automatically projects many plausible high-impact future scenarios to provide insights for strategic decision making and more targeted business continuity scenario planning.

    The emergence of COVID-19 in December 2019 led the team to create a model based entirely on the potential business impacts of a pandemic. At the time, the forces behind supply chain disruptions were not widely thought to include disease. But the model proved impressively accurate as the COVID-19 pandemic unfolded. In fact, SPA proposed that school closures may be a factor in reducing GDP growth, disrupting short-term growth, heightening uncertainty, causing supply chain disruptions and putting just-in-time inventories at risk. All of which were confirmed. 

    Now EY teams and IBM have further developed this into a technology called Risk Intelligence Operations (RIO), a technology that analyzes thousands times faster and thousands times more data while using AI as well.

    At the time, this study was largely ignored as most supply chains were considered resilient by the businesses that supported them. That’s not a mistake worth repeating.

Shifting mindsets

All of this means that there is no more business as usual. “Usual” keeps moving. 

As the poet Heraclitus said, “No man ever steps in the same river twice, for it is not the same river and he is not the same man.” For resilient enterprises it’s the same. The environment is constantly changing, and so is the organization. There is a need to shift from recovery capabilities limited to individual domains to a capability of continuity, strategic change and threat resistance, and a culture of resilience. 

This requires a different way of thinking about how you operate. 

Typically, a threat or increased demands in one high-priority area of value (for example, customer, employee, societal or shareholder value) will make you alert to the holistic picture.

Coupling technology with human intelligence and judgment, organizations will be able to better foresee risks and turn them into opportunities.
Tonny Dekker
EY Global Consulting Enterprise Risk Leader

This will kickstart a new approach to risk that links across all areas of your organization, adapting strategy and business model to a changing business environment, and brings all of your organizational capabilities together to deliver sustainable long-term value for your stakeholders.

Are you ready for any risk?

The foundation for resilience is the integration of anticipation, targeted preparation, effective response and adaptation. Strengthening resilience efforts improves preparedness for a multiplicity of multi-domain risks, both known and unknown, and short- and long-term.

Currently, many organizations go through a laborious risk management process that involves risk committees reading documents, discussing and voting on risk priorities before exploring potential impacts and how to better manage risk. However, these processes fail to identify incremental and lasting changes in the business environment that have not yet materialized as a risk or opportunity. In particular, expectations of organizations — including values, purpose and sustainability — are increasing and changing all the time, coming from employees, customers, shareholders, regulators and more.

Failing to identify changes in any of these groups’ expectations and adapting the company strategy, business model or products and services accordingly could have catastrophic effects on your business.

Truly resilient organizations demonstrate the ability to leverage data and technology to enhance and accelerate this process. For example, EY teams and IBM’s Risk Intelligence Operations (RIO) technology can scan tens of thousands of documents in a few minutes, giving an enriched overview of cause-and-effect relationships and predicting how these will evolve.

Coupling technology with human intelligence and judgement, highly resilient organizations are able to identify emerging changes in their business environment on a real-time basis and identify whether these present risks or opportunities.

Enterprise resilience checklist

Building resilience starts with a capability assessment.

Ask yourself:

  • Does your board spend enough time understanding what changes in the business environment are emerging and whether these present risks or opportunities? Does your board evaluate potential future scenarios given these changes in the environment, how these scenarios would impact the company and whether the current strategy and business model would be viable in each of these scenarios?
  • Has the organization deployed simulation and risk monitoring across the value chain to enable end-to-end visibility across your value chain?
  • Has the organization defined a clear success plan to remain resilient against any talent risk or crisis scenario?
  • How effective is the organization’s capability to leverage consumer data, analytics and insights to inform product innovation and development?
  • Have you identified your critical assets and their interdependencies? And is there an appropriate level of robustness and redundancy provided for each to minimize service disruption?
  • Does the organization test its resilience against a range of operational and strategic scenarios?

By understanding your resilience capabilities across areas including technology, physical assets, value chain, governance and talent, you can prepare yourself for a transformation that will not only build resilience and trust, but long-term value too. 

With special thanks to Patrick Erbsland and Mangesh Ulman who also contributed to this article.

Summary

Many organizations have historically focused resilience efforts on their ability to return services back to normal conditions following a sudden disruption. Now, organizations should focus on capabilities that ensure long-term viability against a backdrop of strategic change and the changing external environment. This will equip organizations with the ability to survive and flourish in the face of turbulent change, which may require adaptation of its strategy and business model rather than returning back to normal.

About this article

Authors
Tonny Dekker

EY Global Consulting Enterprise Risk Leader

Excited to serve as a Global Client Service Partner with over 25 years working to transform the businesses of our big Global Clients. Straight-talker with a big heart.

Maurice van der Sanden

EY EMEIA Risk Consulting Enterprise Resilience Leader

Transforming risk management through technology. Hands-on collaborator interested in the details. Husband and father. Enjoys time with family and friends, ideally over a good meal. Global citizen.

Related topics Consulting Risk
Upvote