Is your business resilient? Just over 12 months ago, many business leaders would have confidently answered ‘yes’.
But now, over a year on from the beginning of the COVID-19 pandemic, something’s becoming increasingly apparent. Business resilience plans that failed to look at survival and recovery as a long-game aren’t providing the level of resilience needed.
Global pandemic or not, most business resilience frameworks weren’t developed with a disruption of this magnitude in mind. So what have we learned about business resilience in the past year? In short: that not all interruptions are short-lived. Some are marathons of epic proportions, but it’s possible to get through them.
And many organisations are not only surviving, but actually thriving in these uncertain times.
What makes a resilient business?
Simply put, resilience is the ability to absorb and weather storms, big and small.
Resilience in business is defined as being in a strong enough position to both thrive in stressful (or lower business/consumer confidence) environments and recover from any hits from said environments. It’s doing accurate risk management and planning, and then being able to put those plans into action quickly.
Most of the work should actually happen in the preparatory stage around risk management.
Types of obstacles to prepare for
There are two broad types of obstacles that can cause the kind of business stress that requires resilience: indirect and direct.
Indirect obstacles are stressors that occur outside your company’s general control, like:
- natural disasters
- economic downturn
- pandemics or other public health crises
- government and other policy changes.
Direct obstacles are stressors that affect your business from within, such as:
- employee theft/fraud
- cultural issues
- lack of skilled employees
- damage to commercial buildings (flooding, fire etc.)
- supply issues
To build an effective business resilience strategy, it’s important to take into account both indirect and direct risks. You also need to develop contingency plans that your company can easily and effectively implement.
But how exactly do you develop that business resilience framework?
What should you include in a business resilience framework?
Plan, respond, recover
When you’re looking at business interruption management, the first step is to identify what potential interruptions might exist, either internal or external. As we’ve recently learned, some things (like global pandemics) can fall into both categories. Internally, absenteeism can increase or your offices could be closed down. And externally, economic downturns, supply chain issues and changing government policy can all play a part. It’s important to be prepared for a range of circumstances.
When you collate your list of potential risks, make sure to consult people at every level of your organisation, from upper management to deskless employees. Their individual knowledge and experience will shine a broader light on the possible issues that may arise.
Once you’ve identified a range of possible risks, likely or unlikely, it’s time to develop a plan to deal with each if they eventuate. This plan needs to address both response and recovery.
Most importantly, though, business interruption modelling clearly needs to happen before the interruption event. If you’re prepared, you can quickly action your business continuity plan when the event happens. After that, it’s as simple as managing the risk that you have planned for.
Essential elements of a business resilience strategy
Although there are several variables, most business risks will fall into one of five categories.
1. Brand and reputation risk
This is a risk that every business, big or small, faces. From advertising backlash to product or service failure, there’s always a risk that the brand and reputation you’ve worked so hard to develop will be challenged.
Plan – Make sure your processes minimise the possibility of offending or disappointing customers. This could be as simple as putting a quality control strategy in place. Be aware that social media will probably play a part in both the issue and its solution. Then make sure your business has the expertise to cope on all platforms, from social media to customer-facing interactions.
Respond – Sometimes, things will slip through the cracks. When they do, ensure that a single department or person is responsible for quickly implementing your established plan.
Recover – This can range from sincere and timely apologies to announcements that move the narrative forward. Ensure your plan can recover your brand’s reputation with integrity and meaningful action.
2. Security risk
Any resilient business will be aware of risks to their security, from shoplifting to online hacking. In the constantly evolving digital world, it’s not just your own business that’s at risk. A security breach can also expose your customers’ sensitive data, so it’s incredibly important to stay on top of this area. This is essential to protect yourself and your customers not just from the initial risk, but also from any financial or legal liabilities that can eventuate.
Plan – As always, prevention is key to minimising security risks. Consider a security audit that looks into all areas of your business. A great way to avoid cyber security risks is to place an extra layer between you and your suppliers.
An advanced supply chain finance platform such as Octet can help to ensure that all suppliers (particularly international ones) go through a proven verification process. It’s also important to have adequate insurance and enough funds to be able to continue with business if something goes wrong.
Respond – In case prevention fails, quickly action your established plan. This could include any relevant cyber insurance, external consultation or quick access to additional funds via Trade Finance or Supply Chain Accelerate to continue paying your suppliers.
Recover – Rapidly enacting your plan, continuing with business as usual and making sure to be transparent where necessary with any impacted customers are the keys to a quick recovery.
“Having extra physical and digital security will always be important, but it’s even more so in the current turbulent environment. As with anything, when you’re flailing through hectic times, balls can be dropped. But when your suppliers have all been verified and you can track, validate and authorise your supply chain transactions at every step – which is the case when your business uses Octet, you have much more certainty.” – Duncan Khoury, Octet.
3. Compliance risk
For businesses of all sizes, meeting the expectations of laws, ethics and regulations of both their industry and jurisdiction can be a bit of a minefield. Each different industry has an abundance of laws and regulations that need to be followed, ranging from data protection to occupational health and safety. Failure to comply can have expensive and reputation-related consequences.
Plan – It’s important to be aware of regulations and remain in touch with the regulatory bodies that monitor and enforce compliance in your industry. Make sure someone in your business is up-to-date on ever-changing legislation and obligations, and that their workload doesn’t stop them from staying on top of this.
Respond – If something does go wrong, seek assistance from consultants, insurance providers and your legal team. If you already have a department or consultant who is briefed on the possible compliance-related issues – and aware of the established plan – then acting quickly will be easier. And like anything, this can be a costly exercise, so having the cash flow ready to ensure you can call in the experts is essential. Non-compliance often carries fines and penalties.
Recover – Having a dedicated team or person to take the lead should ensure you can swiftly action your established plan, while the rest of the team can remain focused on continuing to trade.
4. Financial and Economic Risk
These sorts of risks are often caused by any of the internal issues we mentioned above. But external factors such as economic downturn or COVID-19 can also have an impact. The cost of a decline in productivity, inflated supply prices and increased PPE needs during this pandemic have severely affected many businesses.
Plan – To ensure your company is resilient against financial risk, strong and diversified cash flow is key – and not just for a short period of time. As we’ve learned, resilience is a long game. You need to ensure that you can continue to both support your existing liabilities and gear up for sales opportunities when they arrive.
Ready to respond – When you’ve prepared for financial or economic risk, your ability to react well and continue with business depends on the cash flow available to you. This may either come from an emergency fund or a line of credit such as Debtor Finance. Having a range of facilities available before something goes wrong allows you to respond as quickly as you need to.
Recover – A period of downturn can often affect supply chains. The companies that are recovering the fastest from the impacts of COVID-19 are the ones that geared up well in advance. And this was only possible if their cash flow position afforded them the opportunity to do so.
5. Operational Risk
Regardless of size – whether you’re talking about an office or a manufacturing plant – every business has operational risks that can jeopardise business continuity.
Plan – As always, prevention is the first step. Ensure your plan addresses all possible issues, from trip hazards to clear signage, to adequate PPE and natural disaster plans. Staff training should also be a focus area for prevention, so ensure you train your employees to avoid mistakes that can cost time and money.
Respond – When something does go wrong, your back-up plan should ensure it minimally affects operations. Public Liability and other insurance is also key here, in terms of responding to income loss, legal costs, product wastage and property damage.
Recover – As always, your company’s ability to recover is based on its ability to continue trading through adverse times. This means having a combination of diversified income streams, strong cash flow and skilled people power to get you through to brighter periods.
Regardless of risk type, communication is key
Finally, one of the most important parts of developing and implementing any business resilience framework is ensuring everyone involved understands the processes. Training your staff and giving them access to the information and people needed to enact the plan will mean your business can better weather any storm that may arise.
Interested in exploring your options and improving your cash flow position? Take a closer look at our market-leading working capital solutions and get in touch to discuss.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.