Resilient businesses need a firm eye on the horizon

Ignoring the potential perils ahead could bring your reputation crashing down.

by Howard Kerr
Last Updated: 18 Sep 2017

When you’re heading for the canvas in boxing there is an important distinction between a knockout and a knockdown. Summoning the strength to rise from the canvas and fight back takes real resilience. The ability to bounce back from challenge and emerge stronger for it is important in business, too.

Firms such as Shell that have weathered the recent Texas floods and swiftly resumed operations at their refineries deserve acknowledgement. We recognise that such abilities are not innate or unique, but rather a replicable set of factors which can be learned and invested in – something we refer to as organisational resilience.

According to the 1,250 global business leaders that contributed to our Organizational Resilience Index, the top factor in long-term success, ahead of financial achievement and business leadership, is reputation. What is surprising is how many leaders are driving blind and scared when it comes to their corporate reputations. While two thirds of those we spoke to felt they excelled in maintaining their reputation, a third of leaders felt their organisations were average to poor at spotting incoming risks and opportunities.

Failing to invest sufficiently in horizon scanning means that when the inevitable tumble does occur, organisations lack the processes and training to interrupt and isolate a chain of consequences that can lead to catastrophe. Horizon scanning needs to be all encompassing, covering reputational risks across the environment, civil society and stakeholders on ethical and social responsibility issues.

Recent weeks have shown us how quickly organisations that have failed to spot which way the wind is blowing can fold following a failure of their corporate reputations. On the ten year anniversary of Northern Rock’s collapse, ‘reputation management agency’, Bell Pottinger entered administration. Worryingly, these are not isolated examples, in all 43% of those that contributed to our index believe their organisation is strongly susceptible to such reputational risks.

Why are reputational issues so much more damaging than other operational issues, and how should business leaders manage them? Truly great leaders recognize that however good your balance, it is inevitable that you will wobble. The important thing is to encourage a culture of ‘zero trauma’ rather than ‘zero defects’.

At BSI we see organisational resilience as a holistic practice; there is no silver bullet in terms of people, process or product that can protect the whole from risk. Mastering it requires the adoption of excellent habits and best practice to deliver business improvement by embedding competence and skills throughout the business and down the supply chain. This takes commitment from the whole company, transforming how it thinks, how it runs and how it is perceived.

One area that is consistently flagged as a source of risk is the supply chain. Indeed it came bottom of our index performance table, just behind innovation and horizon scanning. Just consider the toll that battery fires and airbags have taken on telecoms and automotive firms in recent years. The onus is on leaders to focus on maintaining a clear view of what’s happening in their supply chains, while using governance frameworks to maintain high ethical standards. An excellent example of this has been Shell, which in responding to Hurricane Harvey’s once in a 500,000 year event and had rehearsed an effective contingency plan across not only its own operations but that of suppliers. In short a robust state of preparedness.

Now when it comes to long term horizon scanning, you probably don’t need to be thinking half a million years ahead, but it is important to maintain a keen view of threats and opportunities on the horizon. Our research reveals that organisations become increasingly shortsighted and forgetful with age, a lack of processes and systems mean that organisations are less able to learn from past events, understand potential threats, and make the changes they need to. A resilient organisation is one that not merely survives over the long term, but also flourishes - passing the test of time.

Howard Kerr is the chief executive of BSI Global

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