By James Crask ,
Consulting Director & Resilience Advisory Lead, UK & Ireland
11/22/2023 · 5 minute read
This is an excerpt from an article originally published in the 2023 Commonwealth Security Review.
Seldom have organizations had their risk resilience tested more than it has been in the past few years. Business and government leaders understand that the modern risk landscape is complex and interconnected, but they aren’t always ready for how those connections can play out in terms of causing disruption.
Global events offer constant reminders about a key aspect of resilience: Organizations would be well-served to adopt a structured, disciplined resilience approach that accounts for situations in which multiple risk events interact. The Global Risks Report 2023 — from the World Economic Forum (WEF), Marsh, and others — called such an accumulation of compounding risks “polycrises.”
COVID-19, ongoing political conflicts, supply chain disruptions, and other issues, have shown how vulnerable our economies are to major external shocks. In fact, our economies are much more vulnerable than perhaps they were in previous years, for reasons including:
While business continuity planning and good crisis management are important, resilience encompasses much more. An integrated approach to resilience provides organizations a competitive advantage over less-prepared peers, as well as the ability to adapt to constantly changing external circumstances.
As the volatility, velocity, and magnitude of risks increase, many organizations find themselves unprepared for the cascading impacts from polycrises.
For example, Russia’s invasion of Ukraine in February, 2022 propelled geopolitical risk front and center, but many organizations were ill prepared for the knock-on impacts on energy markets, inflation, and supply chains. Regulatory issues in the form of sanctions against Russia and increased cyberattacks further complicated matters. Climate issues, too, became entangled as extreme drought conditions in Europe in the summer of 2022 forced some nuclear plants to scale back power generation because they could not release cooling water into low-flowing rivers.
The interconnectivity of crisis events is pushing organizations to maintain a more comprehensive assessment of the risks they face. At Marsh we believe that:
The benefits of a resilience strategy can manifest in many ways — from increased levels of trust in the organization and its leadership, to increased share performance and, of course, an improved state of readiness for any crisis scenario. For example, when global trade issues heated up several years ago, one of Marsh’s large retail clients anticipated potential disruptions in supply chains. They were not sure of exactly how issues might manifest, but a resilience mindset led the company to begin on-shoring more of its production and suppliers. When the pandemic hit not long after, the moves the company had made helped them navigate the crisis, even though the decisions were not originally made with pandemic risk in mind.
Establishing a comprehensive resilience strategy comes with challenges, not the least of which is maintaining management focus. After all, some may think that, having survived COVID-19 or another recent crisis, there’s no need to worry about the next one. For others, the issue may be one of fatigue following a run of crisis events.
But despite experiencing a rash of negative events, there are reasons for optimism regarding resilience, including:
Resilience isn’t about predicting the future with complete certainty, or reaching a particular destination. It’s about identifying uncertainty in dynamic systems and environments through scenario planning, risk modelling and data analysis, stress testing, and more.
Resilience aims to measure potential impacts, and then reduce uncertainty to the degree that is feasible, enabling better decisions about where to invest.
At Marsh, we work with clients to focus resilience on enabling an organization to anticipate risk, find opportunities, and continue to thrive.