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The Five Key Elements of

Organisational Resilience

© Organisational Resilience Pty Ltd: 85 Guthrie Street, Osborne Park, Western Australia. 6017
+61-(0)8-9446-2099
www.organisationalresilience.com.au

Thank you for requesting our whitepaper. We hope you will find it both interesting and useful.

Section One
Section one discusses the role of resilience, and why it is becoming an important part of everyday business.

Section Two
Section two looks at the five key elements of organisational resilience which can be used to deliver improved
bottom line business results.

Section Three
Section three looks at integrated approaches delivering improved business performance and creates competitive
advantages.

© Organisational Resilience Pty Ltd: 85 Guthrie Street, Osborne Park, Western Australia. 6017
+61-(0)8-9446-2099
www.organisationalresilience.com.au

In the United Kingdom: Guidance for Directors on


Section One - The role of the Combined Code (1999) is also called The
resilience, and why it is becoming an Turnbull Report.
important part of everyday business.
In The USA in response to the collapse of Enron,
Worldcom, and other corporations, the U.S.
This section discusses resilience in business today Congress passed the Sarbanes-Oxley Act of 2002.
and why it is becoming part of everyday business Whilst in Singapore laws such as the Companies
life. Since 2009 Organisational Resilience Pty Ltd Act and the Securities and Futures Act, as well as
has focussed exclusively on advising companies, stock exchange regulations, make some corporate
Government agencies and other organisations on governance disclosures mandatory.
developing their resilience capacities.
The general duty of care requirements under the
Whilst risk management is not new, many Occupational Health and Safety legislation across
organisations find it difficult to achieve the ultimate the globe has now placed greater responsibilities
outcome ―Resilience”. and liabilities on managers and directors to ensure
Conducting risk and vulnerability assessments and work place conditions and work practices do not
more importantly, using the data generated to endanger the lives of workers, whether they are
deliver meaningful outcomes that improve the employees or contractors.
bottom-line results to an organisation remains the
―holy grail‖. For many companies, risk Organisations that build risk management into their
management is a requirement of regulation of some business as usual operations will inevitably find
type or another. Whilst this is a sound reason for improved business outcomes as a result of
undertaking risk management activities in a developing a risk aware culture within the
structured and formalised way, often businesses do organisation. When risks are identified and
not realise the ultimate value due to an absence of assessed against business objectives, a clearer
courage and innovation by management. picture is generated as to what events may occur
that will prevent or disrupt the organisations from
Linking risk management to the business planning achieving its corporate and operational objectives.
and strategy framework is a key to delivering These outcomes are becoming more commonly
business objectives, and creating a resilient known as organisational resilience.
organisation, that gains competitive advantage by
developing adaptive capabilities. All directors need to exercise a general duty of care
and in the case of publicly listed companies this is a
Companies listed on the stock exchanges across responsibility of fulfilling company listing obligations.
the globe now have obligations to identify and More importantly the coupling of statutory
manage risks on an ongoing basis. requirements for risk management with a desire for
business improvement, should deliver the best
In Australia Principle 7 of the Australian Stock results for an organisation.
Exchange’s Principles of Good Corporate
Governance and Best Practise Recommendation
states: “A Company should Recognise and
Manage Risk: Establish a Sound System of Risk
Oversight and Management and Internal
Control”.

© Organisational Resilience Pty Ltd: 85 Guthrie Street, Osborne Park, Western Australia. 6017
+61-(0)8-9446-2099
www.organisationalresilience.com.au

Section Two – Five Key Vulnerability Management


The organisation develops robust
Elements of Organisational Resilience processes for identifying and analysing
vulnerabilities
The organisation has well developed
planning strategies
Organisational Culture The organisation demands comprehensive
The organisation selects, motivates, participation in stress testing and
educates and supports people who have exercises
the requisite skills to flourish in ambiguous The organisation has a clear
and uncertain environments - enabling understanding of the capability and
people to respond quickly, decisively and capacity of its internal resources
effectively to unforeseen and The organisation has a clear
unpredictable forces understanding of capability, capacity and
The organisations workforce impassioned availability of external resources
by a strong sense of leadership The organisation promotes and
The organisation maintains a resilient understands the criticality of
culture and values that builds a sense of organisational connectivity as a key
purpose, empowerment, trust and performance enabler
accountability The organisation promotes business wide
The organisation has transparent support staff engagement and involvement
functions to minimise emotional trauma
Adaptive Capacities
Interdependencies The organisation learns and adapts to new
The organisation maintains strong, broad risk environments, both sudden and
connection networks evolving
The design and architecture of the The organisation builds in flexibility,
organisation is approached systematically, redundancy and options
and not in a piecemeal way The organisation encourages innovation
The organisations sound business and and experimentation
technical architecture, ensures clear The organisation operates without
thinking about function, and effective boundaries and encourages distributed
organisational design settings that diffuse and disperse
The organisation communication structure enterprise assets and operations
is open and non hierarchical The organisation has the ability to not only
bounce back but to also bounce forward —
Situational Awareness with speed, grace, determination and
precision
The organisation is in tune with the
The organisation has the ability to
environment
recognise and react nimbly to
The organisation faces down reality
opportunities as they arise
The organisation understands risk and
potential disruptions (both positive and
negative)

© Organisational Resilience Pty Ltd: 85 Guthrie Street, Osborne Park, Western Australia. 6017
+61-(0)8-9446-2099
www.organisationalresilience.com.au
disruption. To have organisational resilience the
organisation needs to:
Section Three – Integrated anticipate and understand emerging
threats;
approaches deliver improved business understand the impact of threats on the
performance and creates competitive business, supply chain, the community in
advantages which they operate and upon employees
lives;
The world is evolving at an ever increasing rate; develop and maintain supportive
some people even believe that the advances in partnerships with critical stakeholders in
knowledge and technology are making modern their supply chain, sector and community;
society untouchable by disruptive events. This respond to and recover from disruptions as
belief is challenged by Debora MacKenzie, of the a unified whole of organisation team;
New Scientist, who wrote ―As the networks that adapt to disruptions and react flexibly to
connect us become ever more intricate and finely restore routine functions and strengthen
tuned, modern civilisation is becoming increasingly the organisation;
vulnerable‖ 1. Mackenzie suggested that ―once ensure staff members are willing and able
society develops beyond a certain level of to support the organisation to achieve
complexity it becomes increasingly fragile, where a objectives in times of adversity;
minor disturbance may bring everything crashing leadership must have clear direction while
down‖ 2. In his book The Collapse of Complex enabling devolved problem solving.
Societies, Joseph Tainter discusses a possible
cause of this being diminishing returns – a situation
where an ever-increasing level of effort and
complexity is required to support the necessary
returns. As returns diminish and complexity
increases, society will inevitably reach a point
where complexity will outweigh the return, resulting
in the balance of societal resilience being
unfavourable.

Resilience is not a plan, or a checklist. The capacity


of resilience is found in an organisation’s culture,
attitudes and values. As Dr Erica Seville, of the
University of Canterbury, said, ―Resilience is not
something you do, it is something you are‖. Hence
we need to look beyond the tactical elements of
resilience. We need to look at those elements which
are non tangible, those elements which make a
truly resilient organisation.

Leading organisations are putting plans in place to


manage outcomes, rather than specific scenarios
and are creating a capabilities-based approach. An
organisation may not be able to anticipate every
scenario, but it may create response capabilities
that will be resilient no matter what the cause of

© Organisational Resilience Pty Ltd: 85 Guthrie Street, Osborne Park, Western Australia. 6017
+61-(0)8-9446-2099
www.organisationalresilience.com.au

Nokia’s initial assessment of the problem and its


Case Study – A fire that changed rapid and effective response averted a catastrophic
an industry event. In the third quarter of 2000, its profits rose
42% as it expanded its share of the global market to
About 8 p.m. on March 17, 2000, a lightning bolt 30%. Its quarterly statements and annual report for
struck a high-voltage electricity line in New Mexico. 2000 did not even mention the fire.
As power oscillated, a fire broke out in the Royal
Philips Electronics radio frequency chip On July 20, 2000, Ericsson reported that the fire
manufacturing plant in Albuquerque. Personnel and component shortages had caused a second-
reacted quickly and extinguished the fire within ten quarter operating loss of $200 million in its mobile
minutes, a setback, no doubt, but definitely not a phone division. Six months later, it reported
calamity. divisional annual losses of $1.68 billion, a 3% loss
of market share. It also announced the outsourcing
In Albuquerque, Philips staff grappled with the of cell phone manufacturing to Flextronics and the
aftermath of the fire. They soon realised that elimination of several thousand jobs.
cleanup would take at least a week, which meant
that customers would be affected, at least In April 2001, Ericsson signed a Memorandum of
temporarily. Nokia and its archrival, Ericsson, Understanding to create Sony Ericsson; the
accounted for 40% of the plant’s shipments. Philips informal negotiations that led to this step had
management decided that their orders would be started at the height of the crisis in July 2000, the
filled first when the plant returned to normal. deal was finalised in October 2001. Ericsson’s
problems spread across the entire organisation and
Recognising that Philips’ had a problem that could it was not until 2004, that it turned the corner, but as
affect the production of several million mobile a much smaller company. Compared to 2000, its
phones, Nokia took three key steps: revenues had fallen 52%, total assets about 30%,
and number of employees 52%.
A team of executives and engineers
focused on Philips, seeking a major role in
developing alternative plans and pressed
Nokia’s case with Philips executives.
Philips responded by rearranging its plans
in factories as far away as Eindhoven and
Shanghai.
A second cross-continental team
redesigned some chips so that they could
be produced in other Philips and non-
Philips plants.
A third group worked to find alternative
manufacturers to reduce pressure on
Philips. Two suppliers responded within
five days.

At the end of March, Ericsson finally came to


appreciate the gravity of the problem. However, for
reasons unknown, it still did not act speedily.

© Organisational Resilience Pty Ltd: 85 Guthrie Street, Osborne Park, Western Australia. 6017
+61-(0)8-9446-2099
www.organisationalresilience.com.au

Conclusion Organisational Resilience


Resilient organisations are ―hardened‖ to survive Pty Ltd
disruptions of all kinds. They are more competitive
on a day-to-day basis and react to changing market Are independent risk and resilience advisors,
demand ahead of their competitors. They consider operating internationally, from our base in Australia
disruptions to be opportunities rather than utilising networks across Asia, the United Kingdom
problems. Resilient organisations bounce back Europe, Africa and North America. We reinforce our
ahead of the competition, when large-scale work through innovative utilisation of the latest
disruptions affect a whole industry or an entire technology including teleconferences; email; online
region, and win increased market share and client workspaces and data vaults. Our
customer loyalty. embracement of technology in this way ensures we
can practically and cost effectively support our
clients globally although we operate from a base in
Australia.

Our team of professionals boast a multidisciplinary


range of skills and experiences encompassing the
diversity of the entire risk management
environment. With each of our team members
specialising in specific risk management disciplines,
our services deliver value through distinctly evident
outcomes.

© Organisational Resilience Pty Ltd: 85 Guthrie Street, Osborne Park, Western Australia. 6017
+61-(0)8-9446-2099

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