All companies today should ask themselves how to build business resilience.
The term refers to business management aimed at creating organizations capable of adapting and responding to change.
A resilient business knows in advance how to deal with unexpected events, absorbing their impacts and identifying the most efficient ways to keep growing.
This definition might let you believe that business resilience only concerns larger organizations, which have the means to minimize the consequences of an unexpected event.
Yet, every organization today is called upon to develop a flexible structure capable of ensuring continued growth in an altered environment. The years 2020-2022 have shown this clearly: forecasting the future is becoming increasingly difficult.
That’s why it is necessary to have strategies with which to reduce risks, mitigate damage and maximize positive results. A principle that also applies to SMEs; technology offers enormous help even to the smallest businesses.
Along with the benefits of digital, we will explore how the different departments of a company can develop the resilient structure we have talked about, and what the difference is between business resilience and business continuity.
As usual, we will focus on the B2B landscape to understand the benefits and challenges of resilient business management.
Business continuity vs business resilience: the differences
When we talk about business continuity, we refer to the ability of companies to ensure the delivery of their products or services in reasonable time at predefined levels despite production stoppages, supply delays, natural disasters or other unforeseen events.
The definition is given by the ISO 22300:2018 standard.
The concept of business resilience might sound similar, but it is actually broader.
Let’s see why.
A resilient business is not only able to guarantee standard levels of productivity under difficult conditions, but is also capable of continuing to grow in a complex environment.
This is only possible after having formulated a priori strategies with which to deal with possible shocks. These strategies must always be based on an analysis of the market, the organization itself and the formulation of hypothetical scenarios to which the company is called upon to respond.
The collection of data for this purpose and their processing are the essential elements in building a resilient business.
While making exact predictions about the future is impossible, especially in today’s market, it is equally true that there are solutions to anticipate problems, both internal and external to an organization.
Here are some very common ones:
- A shortage of raw material, resulting in a stoppage of production, due to a supplier’s delay.
- A flood that makes a logistics centre inaccessible, blocking the shipment of products.
- An investigation affecting a partner company, with reputational damage also impacting on us.
- The sudden resignation of a key management figure.
- The indefinite closure of a distributor, with a drop in foreign sales.
This list shows how the entire company, from the purchasing department to the general management, can be affected by unforeseen events that need to be remedied.
Each department must therefore be able to react to the blows it suffers, building resilience in all areas of the company, as a recent McKinsey study points out.
It is precisely for this reason that we can decline business resilience into various types:
- Organizational resilience means the ability to build a structure with the resources, human and material, capable of adapting to sudden changes of scenario. The company in this case will have to rely on a team of people capable of working in changing conditions, thanks to specific knowledge and skills. Consider, for example, how companies coped with the pandemic in 2020: those who were already used to working remotely continued to operate more efficiently than their competitors.
- Financial resilience involves a diversification of the forms of investment adopted by a company, but not only that. A company with a resilient financial structure knows how to balance medium- and long-term objectives, focusing on maximizing revenues rather than just controlling costs.
- Operational resilience makes it possible to continue to operate in altered conditions, but as already mentioned, it is not just that. A resilient production structure is able to maintain volumes, raise quality and increase revenues even in the presence of an uncertain market. This is why the business continuity plan – understood as a plan to ensure the continuity of production that we have mentioned – is just one piece in a broader strategy that does not just plug losses, but aims to seize new opportunities even when navigating stormy waters.
- Reputational resilience is typical of organizations that are able to protect their image and defend their acquired positioning through clear policies. A company that is resilient in this respect knows how to prevent crises that could undermine its credibility by selecting partners in line with its values, acting consistently and communicating transparently.
Building a resilient company: the steps
Regardless of the scope, building a resilient company involves some fundamental steps.
Indeed, we must bear in mind that there is no one-size-fits-all approach to this issue and that each organization should act in a manner consistent with its goals, industry and size.
Let us see what questions need to be answered.
- Conduct an analysis of the external environment: is the market growing or shrinking in terms of companies and turnover? What risks are present? What opportunities can be seized in foreign countries? Who are the competitors? What are the future forecasts regarding market trends? What are the public policies regulating it? Are they changing?
- Develop an analysis of the internal environment: is the company equipped with the necessary resources to adopt a resilience plan? What are the investment possibilities in this field? Who should take care of this in the company? What control mechanisms need to be put in place?
- Define a resilience plan: once you have a picture of the company and its environment, you need to move on to the action plan. A comprehensive resilience plan includes a number of coherent elements, and among those that are inevitable is a mapping of the risks to the company, accompanied by the actions to be implemented for risk management. What are the risks to which our company is exposed? How likely are they to occur? How can they be mitigated or eliminated? How to manage communication in case of emergencies?
- Effective monitoring: how effective are the solutions we have introduced? Can they be improved? Is it possible to carry out periodic tests to verify their effectiveness?
Let us now look at how B2B companies can develop their organizational, operational, financial and reputational resilience.
An example of resilience from the B2B world
Originally, the concept of business resilience was applied to the IT areas of companies.
The risk of cybercrime, hacker attacks and infrastructure damage led to the adoption of solutions to protect data.
But as we have seen, the concept actually concerns every company department and, especially today, even sectors far from ICT.
For example, an SME specializing in sheet-metal cutting machine tools is itself called upon to review its strategies to respond to sudden changes in the market.
Think of the post-2020 scenario.
The cancellation of trade fairs and business trips that affected B2B companies for months challenged the way new business relationships were developed.
Machinery manufacturers had to change their organization, increasingly taking advantage of remote and hybrid ways of working. The main challenge concerned the personnel in the sales area, who were largely used to carrying out their activities in person.
On the operational level, it was a matter of maximizing investment in digital lead generation solutions by targeting target companies. Not only that: the analysis of the external environment prompted the company to consider alternative markets to those already beaten, to reduce dependence on customers who were in greater difficulty at the time.
Upstream in the supply chain, it was a matter of dealing with an increasingly pressing supply risk: bottlenecks along global value chains generated production delays for numerous sectors, in addition to rising raw material prices.
To this end, the company’s supply chain manager had to analyse the market to identify alternative suppliers of electronic components for machine building and develop a Plan B to continue operations.
This approach also strengthened the company’s reputation: thanks to the new suppliers, the company was able to fill orders despite a production stoppage by a long-standing partner, thus avoiding damage to its image.
Finally, on a financial level, diversifying its target markets through digital customer research solutions allowed it to maintain its previous level of revenue while saving on business travel.
As the months went by, all these measures were formalized in a plan subject to periodic review, in which roles, procedures and goals are set out for the company departments to pursue in order to ensure a resilient structure.
We have seen what is meant by business resilience, and how the concept is increasingly important today.
Resilience applied to a company is not to be confused with business continuity. The latter, in fact, is operational in nature and concerns the ability to make products and services available within a reasonable timeframe at predetermined levels, in the face of complex conditions.
Business resilience, on the other hand, concerns the strategic ability to be ready in the face of difficult scenarios, while still ensuring sustainable growth by reducing risks and managing them.
The resilient company formulates hypothetical scenarios, identifies ways to deal with them and restarts when challenged, thanks to dedicated plans.
The starting point of this process is an analysis of the internal and external environment to map the risks to which the organization is exposed, the opportunities to be seized to strengthen itself and the actions to be put in place to cope with difficulties.
All this takes place at financial, operational, reputational and organizational levels: the entire structure of a company must change in order to build a resilient business model. We told the story of a B2B manufacturing company that was able to achieve this through ad hoc solutions.
Regardless of sector and size, every company today can (and must) equip itself with the means to grow in an increasingly complex global scenario.