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Following the global health crisis, our businesses today continue to operate in a challenging environment full of unprecedented risks. One only has to think of the energy crisis, financial turbulence, geopolitical turmoil or impending climate change, to name just a few of these risks.

How can you face such difficulties? How should your company or organisation respond to these challenges?

There are of course no general "ready-made" answers to these questions. But there is such a thing as the concept of “resilience”.

This term originates from the Latin “resilire” which means “to rebound or bounce back”; resilience is the ability to withstand adversity and recover from it.

In the event of an unexpected setback, a resilient organisation switches faster and more smoothly to recovery or a new state of equilibrium than its competitor.

Resilient organisations not only respond appropriately to high-risk events with a high impact; they also proactively look for opportunities to create new value from that environmental uncertainty. Or, to put it simply: “they continue to perform well, even in unfavourable circumstances”.

Today, resilience is an indispensable addition to traditional risk management and crisis management. It is crucial for organisations and their leaders to continue to create sustainable value in the current volatile and uncertain situation.

Resilience takes different forms

Organisational resilience is in any case a multifaceted concept with different perspectives. Resilience may not only refer to the inherent "static" ability of organisations to maintain their level of performance under difficult circumstances, but also to the "dynamic" adaptability that develops over time as circumstances change. Organisational resilience can mean both a smooth return to the status quo and the leveraging of current challenges to emerge stronger and more resourceful.

Planned resilience is about installing the necessary discipline to prepare for potential risks and setbacks. It relies on organisational resources, routines and risk management systems to proactively mitigate the negative effects of risks and take advantage of potential upsides.

Adaptive resilience in a dynamic business environment is about extending traditional risk management practices with capabilities that help organisations to adapt smoothly to both expected and unexpected disruptions.

Resilience is different for every organisation

Not all organisations display the same resilience. Some react more quickly to setbacks, recover from them more quickly, and adapt better than others. The type of approach also varies.

One organisation might plan well, meaning they are well-prepared and ready to act because they have the resources and the necessary processes were implemented in advance – they fixed the roof while the sun was shining. These more “sophisticated” companies / organisations are usually larger in size. They have more cumbersome structures, with more resources and well-developed risk management and control systems. “They are prepared for anything at any time”.

Other organisations tend to have a culture in which flexibility, creative thinking and learning are central. They respond appropriately whenever a disruptive event occurs and immediately embrace the “new” environment. These agile, responsive and creative organisations are characterised by a certain degree of decentralisation and a high level of accountability of their teams. These are cultures in which a lot of risk can and may be taken.

Both these examples demonstrate resilience, but the conditions and the mechanisms are different, as are the governance components that enable it. Only the right "tone at the top" can create the desired risk culture and make clear the desired appetite for risk.

Many relevant ‘resilience mechanisms' are important in this situation:

  • the availability of tangible and intangible resources
  • an administrative organisational structure
  • the possibility of decentralised decision-making and collaboration with other players
  • scenario planning and risk management processes
  • an appropriate information infrastructure for monitoring and responding to risks
  • an enabling and inclusive leadership style
  • an organisational culture that promotes both risk awareness and innovation
  • less tangible mechanisms, such as leadership practices and organisational culture

Resilience in SMEs

In terms of resilience, SMEs have a relative advantage due to their smaller size and greater flexibility and clout. They react more quickly and work with more delegation, more confidence and more creativity.

But they are usually less systematic and thorough in their formal approach both to the risks and the practical organisation of their approach.

For example, in young, fast-growing tech companies, flexible change is in their DNA, such as the regular innovations among employees, teams and leadership, right up to the level of the advisory board or board of directors. The common thread through this apparently chaotic event is the importance of clear roles, an abundance of communication and mutual trust.

In the current volatile and uncertain environment, resilience is crucial for organisations and their leaders. Resilience exists within an organisation in various forms. In addition, resilience also differs from company to company, depending on their structure and culture. The enabling governance components can also vary.

If you would you like to know the role of the board of directors in a resilient approach, then look out for the follow-up to this article soon.