Risk at the Speed of Light
There has never been a time when succeeding in business didn’t involve facing monumental challenges and taking great risks. It’s silly to imagine that the forerunners in commerce and industry had it easier than people do today. Still, the modern business environment is a difficult one, and in many ways, it’s much less forgiving that in times past.
Forty short years ago, the idea of universal, instant, digital and global communication would seem to most people like fantastic science fiction. Today it’s a ubiquitous reality. What that means for modern business enterprises is that risk (along with benefit) comes at them at the speed of light and the consequences of negligence or failure are instant and usually devastating.
Business has always been tough, but today a company’s enterprise resilience procedures are more important than ever before. Today, enterprise resilience best practices are a must.
What Is Enterprise Resilience?
Enterprise resilience refers to an organization’s preparedness to deal with the challenges, risks, trials and tribulations of modern business. It means being ready to deal with anticipated risks and responding to unanticipated hazards as they appear.
A resilient company has the capacity for productive reaction to negative circumstances. They effectively use all available enterprise resilience tools and make enterprise resilience integration a top priority.
Metaphorically, enterprise resilience can be thought of as a company’s immune system. The enterprise resilience best practices that a firm implements before problems develop are like vaccinations people get to protect themselves against future diseases.
Enterprise Resilience Enhances Value
Robust, effective enterprise resilience procedures do more than just protect against losses on the downside. They are proven to facilitate value creation on the upside as well. In other words, sound enterprise resilience enhances value (equity) while defending against value erosion.
This is accomplished in several important ways:
- Trust: Investors, lenders, regulators and the public at large appreciate companies they know they can rely on. Resilient companies are trustworthy companies, and that will be reflected in the valuations they receive.
- Protection: Resilient organizations have taken steps to protect the assets that make a company valuable. This includes human resources, financial assets and intellectual property. When things go wrong, enterprise resilience will act as a defense against value erosion.
- Recovery: Not all risks can be avoided altogether. When losses or downturns do occur, the equity value of a resilient company will bounce back faster.
- Anticipation: A huge part of enterprise resilience is anticipation and preparation. The foresight that comes with developing vigorous resilience is a valuable commodity. It means identifying danger before it can do damage and being ready to respond to change.
- Repair: Employing enterprise resilience principles requires a thorough organizational self-evaluation that utilizes high-quality risk, accounting and audit methods. Weaknesses and inefficiencies will inevitably be found. Once identified, such problems can be evaluated and, ultimately, be fixed. This cannot help but improve value.
- Competitiveness: A company that is prepared for (almost) anything is prepared to compete and win.
A Balancing Act
It’s true that to achieve meaningful success, risks must be taken. Often, the greater the risk assumed, the greater the potential for reward. While this fact is as true today as it has ever been, it’s also true that modern operating environments are more complex and intricate than ever. Right now, balancing growth and risk by building enterprise resilience is a business imperative.
Every initiative has a risk profile that is specific to that particular strategy. Discovering and enumerating that risk profile — from strategy conception to implementation and beyond — will be increasingly important going forward. Good business planners will consider the risks that might present themselves if the strategy works and those that will happen if it’s attempted but fails.
Once risk is assessed, potential impacts on performance can be analyzed. Management can decide which strategic options to pursue and which to abandon, as well as which enterprise resilience procedures to implement to protect the investment.
This can be thought of as risk and growth talking to each other to strike the proper balance. In actual practice, it means communication between managers and other professionals, including those in the risk, audit and accounting divisions. The goal is to devise an effective resiliency program and make sure it’s put into place and functions properly.
Creating Opportunities
Organizations that are out of balance — those that take undo risk or those that are too risk-averse — are less likely to achieve their potential compared to those that have found an equilibrium between risk and reward.
When used correctly, enterprise resilience tools can change the whole dynamic of an organization. When investors, managers and employees feel relativity safe and sufficiently protected, a company’s whole attitude can change from defense to offense. Opportunities are more likely to be sought out when they are no longer to be feared. This is how an environment of resilience leads to the proactive pursuit of growth.