At a glance
The need for agile leadership has never been more acute, yet almost half of the participants in a poll conducted by EY for its report, How do you reshape your business with agility and build resilience?, say they are either passive or reactive when it came to responding to disruptors in their industry.
Business leaders need to ensure their organisations are structured to allow for quick and agile responses and communicate with stakeholders when change happens.
Only by being prepared to take bold and rapid action will companies “be able to reshape themselves to thrive now and reinvent themselves in an uncertain future,” the report says.
However, unless strategising and planning for disruption is followed by strong execution, it is an exercise in futility.
“Corporate history is littered with examples of very high-performing companies, which became poor performers or failed because they did not respond to the disruptive event with sufficient courage, speed and determination,” EY says.
According to KPMG, organisations need to adapt their cash flow models to take uncertainty and disruption into account, with regular revisions and short-term cash forecasts to underpin resilience strategies and determine response priorities.
Organisations need to “war game” business operation scenarios to identify possible financial outcomes, develop response strategies and contingency plans.
To do that, companies should model the working capital impact of scaling back the business when trading conditions are difficult and scaling up when demand recovers.
Short-term forecasts are also useful tools for engaging with creditors and funders to seek their forbearance and support.
3. Human capital
It should come of little surprise that people are a key aspect of business resilience.
In a paper on building a more resilient workforce, consulting firm Accenture says workers have two overarching needs – a leadership team that is compassionate and focused on taking care of staff, and confidence in their organisation’s capabilities to navigate an uncertain future.
“A leadership team that looks ahead proactively, and responds rather than reacts, goes a long way toward helping people in volatile times,” Accenture says.
“The ability for leaders to address people’s physical, mental and relational needs is the foundation of trust.”
In addition to their physical needs, workers also need their mental needs met, which includes allowing them to work differently and more flexibly, based on their individual needs.
4. Supply chain
The COVID-19 pandemic severely disrupted global supply chains. While Australia has been generally resilient, the pandemic highlighted several potential vulnerabilities, according to a recent report by the Productivity Commission.
A lack of flexibility, including a dependency on one supplier for critical inputs, geographic clustering and lengthy supply chains all increase an organisation’s exposure.
“Efficient supply chain risk management balances the trade-off between the costs of a disruption – a large increase in the cost of purchasing goods and services upstream – with the opportunity cost of investing in risk management,” the report says.
“To make effective decisions on the level of action to take, firms need to understand the nature of the potential disruption (likelihood, size etc.), and its potential impact to their supply chains.”
The resilience of an organisation’s technology is of growing importance in helping it respond to shocks and change.
Consulting firm McKinsey notes that system crashes, outages and service-level disruptions have spiked over the past few years as businesses push to adopt new technologies, fast-track IT application development and bring initiatives to scale quickly.
Many companies are responding to crises with quick fixes, which might get their systems up and running again, but are not addressing the root cause of a disruption.
McKinsey suggests organisations take note of “trigger events” which cause outages and look for a pattern so they can discover what is causing persistent breakdowns.
The reality is, no matter how strong an organisation’s technical capability is, incidents will still occur. To address this, McKinsey says organisations need to develop tools and expert networks to speed incident response.