Forget risk management; long live resilience management

By |2017-05-23T15:42:01-08:00October 15th, 2014|Blog|0 Comments

We are surrounded by evidence of resilience: Our immune systems fight off thousands of potential invaders every day and constantly hone their defenses in response to the threats they experience. Ecosystems evolve to use the forces that might otherwise threaten them, such as the sequoia forests of the Sierra Nevada, which don’t just survive forest fires, but use fire as a tool to foster new seedlings. Nature is full of complex systems that use threats to make themselves stronger.

But what about the companies to which we devote so much of our time and resources? They are complex systems, but are they resilient? What can we do to build resilience into their DNA?

A recent article in the magazine Nature* offers a framework for creating resilience that has much to recommend it. Although the article is focused on the threats created by climate change, the basic concept is widely applicable. In the approach it describes, risks to a system (say, your company or R&D portfolio) are characterized as threats that have some chance of occurring (based on the extent of the vulnerability) and will result in some consequence. The consequence inhibits your companies’ ability to perform, profit, and grow. As a resilient business, an inherent adaptability in your systems and processes allow you to adjust your operations, accommodate and minimize the consequences of the occurrence, and move forward. A resilient company will, over time, recover, and perhaps even exceed its performance prior to the event.

You are probably already thinking that scenario analysis and risk management—activities in which a management team ponders the bad things that might happen, and hedges its bets— are an important part of building resilience. I agree, but I think there’s more to resilience management than scenario thinking.