Roads to Resilience

Section 3: Resilience Principle No 2: ‘Resources and Assets’

Overview of the ‘Resources and Assets’ principle

dependency on single critical resources such as markets, customers, products, brands, suppliers or other business partners. The ability, as well as the mechanisms, to divert resources in response to changing circumstances is pre-planned by resilient organisations and they are also able to identify and seize opportunities, taking advantage of the positive aspects of risk.

Introduction to ‘Resources and Assets’ To avoid single points of failure, resilient organisations reduce their dependency on particular critical resources and assets including customers, suppliers, markets, brands, products, investors, knowledge and business partners. They identify these potential weaknesses through scenario analyses and stress-testing of strategy, tactics and operations . Based on the insights gained, they increase the flexibility and diversity of their resources and assets . The focus is on selecting a set of internal and external capabilities that can be aligned to manage risk effectively and take advantage of business opportunities as they arise. This includes developing the range and diversity of resources that will be the most effective in both dealing with expected risks and responding to the unexpected ones. Understanding ‘Resources and Assets’ Resilient organisations have resources and assets that are flexible and diversified and there are four components associated with this principle: 1.  Risk Appetite : setting the risk attitude and operational risk appetite for the organisation and its networks is an important strategic step in avoiding and mitigating certain risks up-front. Undertaking this task sets the parameters within which the organisation will do business. Defining risk appetite also prompts an organisation to check how dependent it is willing to be on particular suppliers, markets or resources. Risk appetite is especially important in relation to operations and should be consistent with the attitude of the board to strategic and tactical risks. This principle ensures that an organisation has planned the allocation of r esources and assets in a way that anticipates the need for flexibility and diversity, as well as ensuring that resources and assets are utilised in the most effective manner. Strategy and tactics need to be developed in line with the attitude of the board to risk and in a way that will build the reputation of the organisation. Resilient organisations avoid and/or manage potential single points of failure by reducing their

2.  Limit Dependencies: the case study organisations have all taken steps to limit their reliance on specific customers, products, markets, contractors, suppliers and other business partners. This reduces their exposure to single points of failure and potential problems are mitigated by diversification of resources. TTP operates in different markets, including consumer products and medical devices, so that it is less at risk from market fluctuations. It also limits dependency by deliberately seeking to have a balance of high-risk and low-risk projects in its portfolio. 3.  Build Flexibility: an unexpected downturn in a major market can spell disaster for a business if it is unprepared. This is why the case study organisations use flexibility as part of their business model. The use of flexibility may include having multiple production sites and assets. If a particular part of the operation encounters problems, the impact on the wider organisation is contained. Flexibility does not prevent risks from materialising, but it does ensure the organisation has more than one way of dealing with the consequences. 4.  Scenario Planning: the case study organisations use well-developed and sophisticated scenario planning and stress-testing. Standard scenario planning tries to identify potential risks and what the suitable responses would be. A broader approach also looks at the resource implications and asks what the ideal range of resources (both internal and external) would be for each of the scenarios identified. This approach helps to challenge underlying business assumptions and develop plans for futures that are uncertain and largely unmeasurable.

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Section 3: Resilience Principle No 2: ‘Resources and Assets’