Successful organizations aiming to position themselves within the market focus their strategies on globalization and digitization. These key areas have been on the board agenda for quite a long time. However, following the recent pandemic and extreme weather events across the globe, risk managers are pressuring boards to integrate these with resilience and sustainability.
Risk and resilience have been the thematic discussion during an event sponsored by the Federation of European Risk Management Associations (FERMA) earlier this week in Brussels. The event brought together risk professionals across Europe, and BDO Malta was represented by its Manager Risk Advisory Services, Colin Calleja. “FERMA Talks: From Risk to Resilience. Learning to deal with disruption” focused on current and emerging risk matters and included high ranking representation from the European Commission and European Parliament.
The recent survey commissioned by FERMA, “Risk Management, Recovery and Resilience”, highlighted the shift in thinking patterns by organizations. The Covid-19 pandemic was the motivator for this shift, in particular due to systemic risks emanating from business interruption, supply chain disruptions, and increased compliance requirements. This led decision-makers to look further into business continuity management, detective and preventive controls, and business interruption insurance covers.
The European Commission Vice President Maroš Šefčovič argued that the pandemic has raised the profile of risk and insurance management in Europe. The EU Commission has pledged its commitment towards resilience and is currently drafting a scheme, with the contribution of FERMA, to ensure that European business organizations become resilient to future disruptions.
Resilience depends on three key areas: structures and processes, vision, and leadership. Adopting a robust business continuity plan entices the consolidated management of risk areas which may have a significant impact on organizational objectives.
Organizations do not operate in isolation. Disruptions to supply chains, cyber security threats, and changing work practices are just a few risk areas which are constantly threatening organizations across Europe.
Identifying key risk areas is crucial. However, successful organizations should adopt a robust mitigation plan. To start with, the main roles within a 3-lines of defense governance structure should work closely together and ensure that risks are adequately managed and monitored. Risk identification should be extended further, factoring in the nature and complexity of, and dependency on, outsourcing services.
The transition from crisis management to normal operations is key to organizational sustainability. Boards should work with stakeholders to ensure a smooth transition, adopting a culture of preparedness for any eventuality rather than being reactive and responding to future disruptions.
Resilient organizations tend to factor in changes in consumer behavior and linking these with business objectives.
One of the key learning outcomes achieved during the FERMA event was the importance of data sharing. Resilient organizations effectively and efficiently communicate relevant, significant and strategic information, internally and across the whole sector. Organizations need to learn from experiences, while thinking proactively on how to manage significant risks and become resilient. The pandemic should be used as an example, enabling organizations to be prepared for any black swans which may disrupt, or threaten to disrupt, business operations.
Resilience has become crucial in today’s board agendas, and indeed in organizational strategic objectives. Senior key officials should look at the volatility and complexity of their business environment and ensure that their organization is reliable and predictable in identifying potential disruptions.
Ultimately, we can manage what we can measure, and that is why one is required to be honest, inclusive and communicate properly.
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