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Business Resilience

Updated on April 13, 2024
Article byPallabi Banerjee
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Business Resilience Meaning

Business Resilience refers to the capacity or the ability of the business to adjust and adapt to any unforeseen and sudden changes in the economic and business environment, that directly or indirectly affects the smooth working of the operational procedures.

Business Resilience

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The adaptability comes from the inherent strength and stability of the enterprise that is built over the years through strategic planning and implementation of suitable opportunities. The process requires skilled and efficient management who can create an environment that can withstand any negative situation and continue sustainably.

Key Takeaways

  • Business resilience refers to the ability of the business to adjust and adapt to unforeseen changes.
  • It affects the operational process, directly or indirectly. It is necessary to design techniques and strategies that can minimize the risk of loss caused by such unexpected emergencies.
  • It requires planning and harnessing opportunity to create a strong foundation.
  • A skilled and experienced management can ensure the resilience of the business process. Leaders in the business world have learned to identify and focus on controlling such happenings to survive in this competitive environment.  

Business Resilience Explained

The concept of business resilience explains how an entity can, not only survive but also maintain its market in times of utmost testing economic and political situations. Such times pose a huge threat to the continuity and operation of the business processes, which many small and weak entities are often not able to override.  

This business resilience framework helps build an overall, strong industrial base within an economy. The fact cannot be denied that there are various unidentified and unseen crises within an industrial environment that are unavoidable and continuously threaten to disrupt the smooth working of innumerable organizational processes. They not only create problems within the domestic front of a country but also at global levels, through the creation of a ripple effect.

The capacity of an organization to remain resilient towards such a crisis is created by the existence of a very strong foundation that is a result of a flexible and well-planned approach, an innovative mindset of the management and employees, along dedication towards maintaining an effort towards keeping the interest of the company above their interest results in ideal business resilience strategies.

How To Build?

It is quite interesting to study how to build such a business resilience framework that will be able to withstand a high volume of uncertainty and navigate those complex times effectively.

#1 – Skill Of The Management And Board

It is necessary to have a team of management personnel and a board of directors who are skilled and experienced enough to effectively manage complex situations. They should be able to learn from any past mistakes and respond to negative changes that may threaten to topple the operational procedures with a mindset to look beyond the challenges and problems meant for the shorter period.

#2 – Responsible Ownership

All persons on the board and even employees should have the capacity and interest to take ownership and be accountable for their actions. It means that they must understand the result of whatever they do and be ready to accept and critical analysis regarding the same. They must take ownership of any negative deviation from plans and rectify them on time.

#3 – Value Creation

A company must concentrate on long-term value creation that will help them to stand out as a responsible entity in the global market. It will guide them in promoting practices that are sustainable and promote business resilience programs through healthy corporate governance within the entity.

#4 – Responsibility Towards Stakeholders

An operational process with work smoothly only when its stakeholders, which include the lenders, shareholders, consumers, employees, etc, are satisfied that their interests are looked after and protected. Such organizations with healthy stakeholder relationships tends to have the ability of a strong foundation that is tough to break because they already have an established market for themselves.

#5 – Transparency

Transparency is a huge factor in building a strong business foundation. Transparency in terms of financial conditions, product and service specifications, long-term business goals and plans, etc, plays an important role in gaining customer faith, loyalty, and interest.

How To Measure?

There are ways and means to measure the concept closely. Some of these are as follows:

#1 – Financial Strength

This is one of the most important factors that contribute to a resilient organizational environment. Such companies are identified using metrics like debt-to-equity ratio, cash flow, return on assets, levels of working capital, profit margins, etc.

#2 – Organizational Strength

This refers to the strength of the company to create and encourage a supportive and thriving workplace that brings out the best in all through motivation, encouragement, and safety. It also ensures loyalty and customer satisfaction.

#3 – Operational Strength

This refers to the metrics used in business resilience programs to measure the exposure to threats related to errors and disasters by humans, cyberattacks, etc. by using Recovery Point Objective (RPO), Recovery Time Objective (RTO), or the Mean Time to Recover (MTTR).

Examples

Let us explain the concept of business resilience strategies with some examples:

Example #1

We assume that ABC Ltd is a multinational company in the pharmaceutical industry that has a global brand image. It focuses particularly on manufacturing medicines used to treat a type of rare skin disease. However one of its competitors, who also specializes in the production of the same medicine, adopted some fraudulent approach in the manufacturing process.

This resulted in a court order of permanent termination of that medicine in the market. Thus, even though ABC Ltd has been doing its business ethically, it has suffered setbacks too. However, due to its strong customer base and brand name, it easily managed to tide over the crisis by focusing more on other products and increasing its sales, proving its resilience.

Example #2

A recent article published in June 2023 stated how companies in the energy sector are under continuous uncertainty, due to price volatility and pressure for carbon emission control. According to this McKinsey report, companies are trying their best to become less reliant on fossil fuels and use more clean energy. Therefore, they must identify new opportunities and trends and create competitive business models that will help to thrive and control risk exposure by optimizing their portfolio and ensuring sustainable, long-term growth.

Importance

The importance of the concept lies in many ways, as follows:

  • Protection From Disruption A business that is resilient to sudden changes, can offer protection to its operations from facing disruptions and downfall that may threaten its continuity.
  • Minimization Of Loss Resilience does not mean that the company will not face any problems. However, it means that the losses incurred due to disruption will be under control and easy to handle.
  • Ensuring Safety Since the entity has a greater ability to absorb shocks, it has the potential to create a safe and secure environment for its employees and stakeholders, ensuring the stability of jobs and processes.
  • Image Building Customers have greater faith and trust in companies that are resilient to unexpected negative market conditions, resulting in the creation of a good brand image and customer base.

Business Resilience vs Business Continuity

Even though both the above concepts are very closely related, there are some differences between them, as follows:

  • The former refers to the strategies designed by the business to face any unforeseen situations, external or internal threats, and altered circumstances that may deviate it negatively. However, the latter refers to plans that are designed to continue delivering the best level of products and services per customer demands.
  • Building business resilience is a long-term approach that concentrates on future unanticipated problems and the latter refers to mostly short-term approaches that focus on good customer services and products, marketing, advertising, investment in profitable projects earning good returns, etc.
  • Building business resilience is more closely related to organizational structure, operational process, transparency, business ethics, etc. But the latter is close to goods and services, funding, marketing, expansion, and growth.

Thus, even though the above points state the differences between them, they depict a picture of interdependence and close relations that will continue to help the organization grow.

Frequently Asked Questions (FAQs)

What is the board’s role in the creation of business resilience?

The Board should have the necessary foresightedness and capability to design strategies to make the company adaptable to sudden changes. This will help the business manage shocks easily and tide over it within a very short time.

How to improve business resilience?

The management should coordinate and create an environment capable of handling natural or economic disasters, with strong intelligence and emergency response teams who are well-trained. This will help in identifying threats, responding to them in the process, and maintaining sustainability.

What Is the importance of cybersecurity in business resilience?

Cybersecurity is important because a glitch in the systems may break down the whole organizational process, and leakage in confidential data. Such a compromise will destroy the company’s image in the market and lead to a decline in the sale, revenue, and profits.

This article has been a guide to Business Resilience & its meaning. We explain its differences with business continuity, examples, and how to build and measure it. You may also find some useful articles here –

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