In the coming decade, enterprise resilience (ER) will become the overarching imperative for companies large and small. Writing in the journal Strategy+Business,1 Randy Starr and his colleagues at Booz Allen Hamilton define ER as “the ability and capacity to withstand systemic discontinuities and adapt to new risk environments.”
In other words, when a threat emerges, a resilient enterprise sees it and responds to it effectively. In fact, it not only survives the threat but it actually turns the crisis into a competitive advantage.
Despite its obvious value, resilience is rare among companies. According to a survey by the National Association of Corporate Treasurers (NACT), 75 percent of Fortune 1000 CFOs and risk managers say that a major disruption to their top “earnings driver” would cause sustained damage to their company’s earnings or threaten its ability to continue to operate.
An “earnings driver” is a business activity that allows the company to gain a competitive advantage and sustain growth. Some companies rely on having specialized or low-cost manufacturing facilities as a top earnings driver. For other companies, the top drivers of earnings are their supply chains, intellectual property, information technologies, or some other asset.
And yet, in the NACT survey, fewer than 25 percent of the respondents said their current risk management efforts anticipate a wide variety of potential threats to their earnings drivers.
These threats can come from many directions. A terrorist attack, such as the ones on September 11, 2001, can disrupt not only such industries as airlines and hotels, but also financial services, real estate, and every other type of business.
Other types of disruptions include earthquakes, power outages, snowstorms, tornadoes, hurricanes, wars, Internet security breaches, corporate frauds, and computer viruses. Furthermore, more conventional threats to top earnings drivers can be just as devastating to a business. For example, a disruptive new technology, an upstart competitor with a dramatically lower cost structure, or the bankruptcy of a supplier can threaten a company’s ability to survive and profit just as much, or more, than a suicide bomber.
Whether through business competition or global warfare, every company is now more vulnerable...
