How businesses can stand the test of time

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.

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.

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.