Resilience reimagined

Whitepaper

Are organizations ready to face the next unknown? This report, co-sponsored by The Economist and Iron Mountain, helps to answer that question.

2 August 202212 min
Resilience Reimagined Meeting

Are organizations ready to facethe next unknown?

Resilience reimagined is a survey-based research program, conducted byEconomist Impact and sponsored by Iron Mountain, studying organizationalresilience. This briefing paper uses insights obtained through survey analysis, deskresearch, and expert interviews to identify changing interpretations of organizationalresilience across ten countries and four industries.

The world is seeing increasing volatility arisingfrom developments such as climate change,pandemics, geopolitical shifts and acceleratingtechnological innovation. In the face of thesedisruptors, risk management tools and systemsare falling short, and a new paradigm is emerging.Executive leaders must approach risk differentlyand consider its impact across the organization.Today, they’re looking at organizational resilienceas the ability to survive and prosper in the faceof sudden disruptions and incremental change.Enabling this requires a suite of capabilities thatshould be in place before disruption strikes. Theseinclude having the capacity to diligently scanthe horizon, anticipate coming shocks, and putmeasures in place to minimize the impact. This isessential to reorient the organization for successin an impacted, evolving environment.

Economist Impact conducted an in-depthresearch program sponsored by Iron Mountainto identify the changing organizationalinterpretations of resilience and provideguidance on planning, building and maintaininga global entity amid significant disruptions. Theresearch included a bespoke survey of 611 seniorexecutives across four major regions (NorthAmerica, Latin America, Europe and Asia-Pacific)in highly regulated sectors (financial services,healthcare and life sciences, energy, and the publicsector). The report’s key findings include:

  • Organizations are increasingly persuaded by the importance of a system-wide approach to resilience. Experiencing the covid-19 pandemic, climate change incidents and global conflicts have accelerated this trend.
  • Leaders express a high degree of optimism about their organization’s resilience, but this may reflect some complacency. Having responded to the covid-19 pandemic, executives may now be overly confident in their ability to survive a more sudden crisis.
  • Organizations that focus on resilience outperform peers on several key metrics, particularly customer satisfaction. These advantages are reflected where it matters most: the bottom line.
  • The risk of cyberattacks and data breaches remains the critical driver of resilience efforts, both anchored in data and IT asset protection strategies.
  • The key to successfully building organizational resilience is creating connections between functions within the enterprise, including finance, legal, HR, IT, records and facilities management, supply chain management, and risk and compliance functions. This, in turn, requires deploying the budget and personnel needed to make it effective.

Workplace transformation
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Organizations have sophisticated processes forrecruitment and retention. Many of these revolvearound the workplace set-up: where people sit,hold meetings, and interact socially within andoutside of work hours. In recent decades moreorganizations have embraced the possibilities ofremote working, and with this shift more paperneeds to move to digital. Document storage shouldbroaden from solely on-premise to more cloudbased hosting strategies. When the pandemic hitand businesses were forced to close their premisesaltogether, these basic operations and procedureswere put to a sterner test than expected. In manycases, where work does not require the physicalproximity of staff and customers, organizationsexperienced little service disruption. Businesseswhere physical interaction is unavoidable eithershut (restaurants, cinemas, sports venues) orcontinued limited work while adapting theirfacilities to social distancing.

As the pandemic demonstrates, many of thechanges introduced in the initial outbreakresponse have become permanent asorganizations rethink their office needs. Somewill consolidate properties or tenancies toreduce their overall footprint, while others divestreal estate that is no longer required as hybridwork practices are embraced. On the one hand,moving information through virtual channelswill become even more important, with thelong-promised ‘paperless office’ coming closerto reality. On the other hand, securing thoseinformation flows will take on an even higherpriority as the organization’s data spills beyondits walls. More than half of the organizationssurveyed have invested in flexible workspacesthat can be adapted to hybrid workforce needs.By contrast, nearly as many have changed theirphysical offices to meet employee wellnessguidelines. So far, only 17% of those surveyedhave closed locations, but 30% prioritize havingmore and smaller physical workspaces.

Remote work is creating another profoundchallenge for executive leadership: the impact ofprolonged isolation bearing on employees’ mentalhealth or the struggles of balancing work andparenting responsibilities. All this will take yearsto unravel, while changes in staff preferencesbetween home and office working—and theiremployers’ response—are yet to be fully workedout. Hybrid work is here to stay, but organizationshave some way to go to understand and adaptfully to the constraints it imposes.

There is work to be done, and leaders recognizethis. Before the pandemic, training in new skillswas the core activity in building workforceresilience, with 57% of respondents implementingprograms. But since the outbreak, attentionhas swung heavily from education to developinghybrid work patterns: about half say the pandemicaccelerated progress in building hybrid worktechnology platforms (49%) and arranging flexibleworking schedules (49%).

Mr Baldwin reflects this positivity in his viewson post-pandemic workforce resilience.“Reorganizations at companies will continue totake place; employee wellbeing is top of mind, asemployees are a company’s number one asset. It isthe staff that allows organizations to be successful.

Data governance and security
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The digital transformation of business, publicsector and social life have brought tremendousopportunity for gains in the quantity and quality ofgoods and services, improvements in productivityand inclusion in financial and commercial marketsof segments previously excluded by geographyor social conditions. But digitalization has alsobrought negatives. One is a proliferation in theharvest and storage of personal data, raisingtrust issues and risks of misuse by unethicalcorporations. The theft of personal data for fraudhas been a rising feature of the digital world forat least three decades. As organizations maketheir data more secure, regulators are alsoclamping down on criminals and fraudsters as attacks become more sophisticated. A companyor government entity suffers a devastatingloss of trust and reputation when its customerdata is breached. Another significant riskis posed by industrial spies or antagonisticgovernments, who can steal intellectualproperty, sabotage operations or eavesdrop onprivate communications. Again, the cost to theorganizations is substantial.

An organization’s approach to asset lifecyclemanagement as a secure practice is central toembedding resilience. Digital fingerprints remain onold phones, laptops, monitors, servers, and officeor healthcare equipment. How organizations plan,acquire, use, maintain and dispose of these assetsis under regulatory scrutiny related to security andenvironmental impact.

The adoption of work practices triggered bythe pandemic increased data security threats,as data are shared more often across widernetworks and managed outside the controlledenvironment of corporate offices. In an age ofhybrid work, securing the computers, laptopsand mobile devices of staff takes a higher priority.Most organizations were already deploying datagovernance and security measures before thepandemic hit, with 54% reporting investment inmonitoring cyber risks and 56% having digitizedphysical records for easy access and safe keeping.Investment has picked up pace in some areassince. In particular, 48% of organizations reporthaving increased investment in hybrid work dataprotection and security applications.

Conclusion

The pandemic and other global disruptionswe’ve faced in 2022 have once again remindedorganizations, both public and private, thatdeveloping resilience can be the differencebetween thriving and sinking. Many have movedtowards a more holistic, system-wide approachto resilience over recent years, and the processcontinues. These trying times have provided theperfect spur for those yet to make a move and haverewarded those already advanced along the track.

Organizations are already beginning to adapt to amore hybrid work environment, with employeesperforming their roles without discriminationbetween their home workspace and the officepremises. This brings greater flexibility tooperations but adds a new layer of vulnerabilities.Organizations are prioritizing securing employees’digital devices, whether desktop computers,laptops or phones while ensuring the continuingsecurity of data flows.

But organizations have a lot more to do. Adoptingbest practices in organizational resilience is stillrare. Few have centralized co-ordination of theirresilience efforts. Few have embedded them ata sufficiently senior level in the organizationalstructure. Few still have resourced themadequately in terms of budget and personnel.

As Dr Flynn summarises: “The old way of doingrisk management largely assumed that most daysare blue-sky days. Today, we’re in a world whereturbulence is the new normal.”

t is up to leaders to demonstrate a strong visionand support for resilience-building and resourceit appropriately. Their efforts should includecreating organizational structures that facilitatecommunication and co-ordination on buildingresilience. In particular, they should focus ontransforming the workplace to enhance resilience,improving data governance and security, bringingmore attention to sustainability and workingtowards operational efficiency.

Organizations, resilience professionals andthe academic community should also focuson developing indicators and metrics that allowsenior leaders to measure the impact of theirresilience functions and create accountabilityfor the results.

And such resilience-building can reverberatethroughout the organization, not just serving itduring times of disruption. “You can preparefor bad things, and that preparation can bringgood things,” says Mr Baldwin at Netflix,summarizing the benefits of this approach.

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In business, change is unavoidable.

Consumers alter their preferences, regulators rewrite the rules, and competitors innovate. These variables are working assumptions for executives when considering strategy and planning, product development and business continuity. But even against this backdrop of recurring volatility, unforeseen events will shake business’ foundations in more profound ways. War, natural disasters and pandemics, circumstances beyond the control or influence of an organisation, require a different kind of preparation and response. In such conditions, leaders must be able to adapt their operations so that business can continue as close to normal as possible, or at least ensuring minimal disruption.

Enabling this requires pre-emptively incorporating a suite of capabilities before a trigger event occurs. These include having the capacity to diligently scan the horizon, anticipate coming shocks, and implement measures to minimise the impact. They also include quickly adapting procedures to meet new circumstances, such as increased attention to employee wellness and reorienting the organisation for success in a potentially altered environment.

These capacities are described collectively as organisational resilience. Organisations can do well for years with weakened resilience if no shocks emerge. Indeed, a critical element of resilience is resisting the complacency that such stability can create. But such periods of stability do not always last, and every organisation will be threatened by shifting conditions beyond its control at some point in time.

Episodes of instability have arisen with increasing frequency over recent decades. While world trade initially deepened globalisation, a backlash among segments of society that lost out has slowed the trend more recently. The accelerating rate of innovation in digital technology has given rise to new products and services, creating new business behemoths that dominate entertainment, retail and business services and fundamentally affecting virtually every person and organisation globally. Climate change, a fringe concern just a few decades ago, has come to the forefront of public concern, propelling the drive to decarbonise our economies while business losses from extreme weather events are growing. Quantifying the impact, Swiss Re, a global insurance company, reports a 20% increase in extreme weather losses between 2020 and 2021, to US$260bn.

Most recently, the pandemic disturbed organisations from continent to continent in a matter of weeks in early 2020, bringing one economy after another to a virtual standstill. Since the second world war, nothing has disrupted commerce or social services on this scale.

The Economist estimates the losses in 2020 and 2021 alone at US$10.3trn, equating to about 12% of global GDP. The pandemic pushed organisations to their limits—and in many cases beyond them—by massively disrupting linkages with suppliers and distributors, isolating consumers from physical outlets for goods and services, shutting down offices and other facilities and leaching the economy. It demonstrated that anticipation, preparation and adaptation are crucial to survival.

Managing risk has been a core function in business for centuries. Organisations have designed action plans to offset the damage. But in today’s increasingly interconnected and technologically mediated world, this often-piecemeal approach—identify risk, plan mitigation—is no longer enough. Organisational resilience offers a broader and more effective approach. Resilience requires a whole-business perspective: not only analysing every business function, but the interdependencies between them as well. Like any complex system, a business is not an isolated set of autonomous functions but a web of relationships contingent on each other. A failure in one part of the business can cascade through the whole system, causing catastrophic damage. Building resilience means involving every aspect of the organisation in a coordinated effort, with clear and constant communication.

The study

Economist Impact conducted an in-depth research programme sponsored by Iron Mountain in early 2022. It included expert interviews and a bespoke survey of 611 senior executives across four major regions (North America, Latin America, Europe and Asia-Pacific) in four highly regulated sectors: financial services, healthcare and life sciences, energy, and the public sector.

The study aims to present a clear point of view on how and why organisational interpretations of resilience are changing and provide guidance on how to plan, build and maintain a global business in the post-pandemic world.

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