Why businesses should be making themselves as resilient as possible
As an unprecedented array of hostile events rains down on the global economy, businesses should respond by making themselves as resilient as possible, for the next two or three years or at least until the dust settles.
That’s the collective conclusion of analysts, consultants and global organisations in response to a broad range of threats.
Some risks are external. As war rages on the borders of Europe, supply chains are under severe stress with sky-high shipping prices and commodity shortages.
Interest rates and inflation are also on the rise for the first time in years. In fact, inflation could be heading for double figures in several countries after years of low single numbers.
For the first time since the early seventies there’s an energy crisis, with some energy-intensive industries facing a nearly 50 per cent jump in production costs, according to the latest calculations by the IMF.
Alarmingly, the energy shock may be here to stay. Even if the conflict in Ukraine were to stop tomorrow, most forecasters expect commodity prices to stay high for the next two years at least.
The resilience playbook
Taking inflation first, how should businesses protect themselves? According to McKinsey, chief executives need to take charge and manage it down, for instance by asking themselves how the business “can design products, services, and experiences to deliver value”.
That would involve the stabilising of supply chains that may be broken, control of costs, staff compensation and repricing among other tasks.
Ultimately, it’s about crisis management, says Sally Llewllyn, regional security director EMEA for International SOS, the global workplace, security and medical consultancy.
“While in the past crisis management teams were often activated for fairly short-term crises, Covid completely changed that because of the constantly changing nature of the pandemic, government interventions and other restrictions,” she tells StrategicRISK.
“In addition to Covid, other geopolitical issues such as military conflict, coups, terrorism and other upheavals have also caused crisis management teams to be activated. Many are juggling multiple issues at the same time.”
However as pressure grows on these teams, they need to be protected from burn-out.
Llewllyn suggests a four-point plan. Back-up talent should be identified to ease the burden and improve responses to future crises. Personnel should be rotated. External experts should be brought in to share the pressure on teams and provide third-party advice and governance. And technology, such as Zoom, should be deployed for quick decisions.