Building resilience in the face of a crisis
We all know that Russia's unprovoked invasion of Ukraine has led to a major humanitarian crisis. Numerous lives continue to be lost daily, and several millions of people are displaced as they flee for their safety. Yet, as I sit here in Medyka-Shehyni, Poland, having crossed into Ukraine several times, I constantly wonder why companies consistently fail to anticipate crises like this one, and I believe it is because they have no genuine concept of crisis management.
I'm not trying to be confrontational; I'm merely asking a question. What does it mean to prepare for and manage a crisis? The numerous last-minute calls we have received to support new customers and long-lost friends show that no one truly understands how to answer this question.
The world seems ill-prepared to manage in times of significant uncertainty and instability. Especially during a geopolitical crisis that a global pandemic has exacerbated.
Escalating challenges
As the pandemic continues, businesses — whether or not they have operations or exposures in Ukraine or Russia — are now facing new and escalating challenges. While the pandemic demonstrated the global economy's vulnerability and modern supply chains, this conflict is adding further stress to our already frail connections.
Exacerbated by highly complex and evolving sanctions and counter-sanctions and air, sea, and land transportation restrictions in the region, many raw materials, and agricultural commodities are becoming more expensive. Shortages are likely to follow.
While much of this was potentially unpredictable, I continue to wonder where the forward planning was? Where was the consideration of what any crisis would mean for longer-term business resilience? As Ukraine and COVID-19 have shown, the knock-on effects of not planning for crises are numerous… and sadly, there are many more ahead of us.
As a result, single points of failure will be put into sharp focus. Take these three examples…
Nickel, which is critical for the EV battery revolution, is heavily sourced from Russia, and a large portion of the neon gas used in semiconductor production is sourced from Ukraine. How prepared are businesses which depend on these supply chains?
Wheat, corn, and sunflower oil imports come from Russia and Ukraine. Shortages in these critical food products could trigger even more severe consequences, including food scarcity and price instability, leading to social and political unrest.
Fertilizer is a significant export for Russia. Increased costs and shortages will impact crop yields in other countries. This is particularly worrying given that the ongoing war is decimating the Ukraine harvest, and its effects will extend well beyond the region.
On top of this, a continuing escalation of events in Ukraine will draw bordering countries directly into the conflict. It could lead to the conscription of eligible employees to shore up local defense forces.
Finally, we can't forget the ever-present threat of cyberattacks with the potential to target entire industries or organizations, making some companies collateral damage.
As a result, organizations need to adapt to this new reality and pay particular attention to how these events may challenge business models and strategies in specific regions and the globe.
For clarity, locations that might have previously been considered a relatively non-threatening risk may now present an increased threat of disruption to an organization's operations.
Six steps your organization can take now
While the situation in Ukraine remains fluid, and there is no certainty as to what may happen in the short or long term, organizations can be better prepared for both the ongoing crisis and future disruptions by asking these key questions and taking action:
1. Do you spend time testing and breaking apart your crisis management plans? As the situation evolves, risk managers should regularly refresh their plans and retrain teams, so they are able to respond effectively.
If you don't have crisis management plans in place, now is the time to prepare them. If in doubt, find regional Risk and Security companies who have on-the-ground experience and expertise in your geographical areas of concern. They will provide you with incredible local and regional insights.
2. How well do you understand your immediate supply chain concerns? It's critical to identify suppliers that will be most vulnerable to the direct consequences of global events and subsequent responses, such as those emerging from the Ukraine-Russia crisis.
Remember to continually monitor either social or political risk, depending on your region. Once again, looking for a more regional Risk and Security company will give you genuinely valuable insights when compared to global providers who outsource their insights and knowledge.
3. Do you make an effort to reach out and then retain contact? Where possible, speak to regionally or locally based Risk and Security providers, suppliers, and trading partners.
Ask how they are impacted by the ongoing events, what additional impacts they may expect, and what could trigger them. Where possible, validate their responses with information from credible and trusted sources to minimize the risk of making important decisions based on misinformation.
4. Why not make a plan for today and then commit to updating it? Prepare a plan that enables you to respond to challenges related to each critical supplier and trading relationship.
Your response plan should set out options in case of future disruptions to the products or services that each of your partners supplies. This should be a live document, reviewed and updated regularly - not something that is filed away.
5. How often do you think about the future? Major events like the ongoing crisis and COVID-19 challenge the 'just in time approach to managing supply chains.
As organizations look to the future, they must set out a strategy that helps them to build back stronger and allows them to tackle greater future challenges.
6. Do you depend too much on products to help you mitigate possible issues? While AI and advanced analytics offer many positive benefits, they can lead to significant unintended (or maliciously intended) consequences for individuals, organizations, and society.
Technology lacks ontology, identity, the logic of appropriateness, and narrative. Only utilize technology to support your risk management plans rather than replace them.
Building future resilience
We can help you and your organization to continue addressing immediate challenges like these while you handle and deal with tomorrow's priorities. Doing this will enable you to build your business resilience long before you need it.
We assess, build, model, and continually improve longer-term resilience by focusing on two time-based horizons:
1. What needs to happen today and over the short term.
2. What needs to be done to protect your business in the longer term.
Scenario analysis can be an important part of business planning and developing resilience. By structuring how impacts are likely to materialize over time, you will become more proactive in your approach to dealing with issues that are just over the horizon.
As you focus on improving today's outcomes and preparing for tomorrow's risks, you and your organizations should:
· Ground your analysis in delivery outcomes: Instead of starting with specific risks, look at different potential types of failure, damage, and impacts that could affect your core business goals. Looking at individual points of failure can help you to build a more comprehensive all-risks approach.
· Embrace a diverse set of resilience strategies: When faced with unknown risks, organizations should be prepared to respond through a variety of approaches. This will enable you to cover as many bases as possible and reduce the risk of single points of failure, such as when a single team, location, technology, or critical supplier fail or are at risk. This diversity can provide you with the resilience you will need to absorb shocks or adapt to changing circumstances.
· Connect resilience efforts with other goals: There is a substantial crossover between resilience and other initiatives to improve your operations, including wider environmental, social, and governance (ESG) activities. Having competing, or worse, conflicting initiatives can be harmful to the wider goal.
The Russia-Ukraine crisis and the COVID-19 pandemic have shown us how unexpected shocks can impact organizations and test their resilience plans.
Resilience is all about adaptation, so it is critical to continuously learn from exercises and actual crises. Then, by implementing those learnings within your resilience strategy, you will emerge stronger, more agile, better prepared, and more alert to changing circumstances.
By preparing for crises, not only will you thrive in calm times, but you'll ensure the continued resilience of your organization when disaster strikes.
For any questions or for help getting started on your resilience strategy, get in touch with us at ICE24 or Al Thuraya Consultancy.