Roads to Resilience

Developing the principles of resilience

The boxed extract below from the Jaguar Land Rover case study illustrates the importance of combining the principles of resilience into a consolidated approach. Risk radar , resources and assets , relationships and networks , rapid response and review and adapt are all part of ensuring that Jaguar Land Rover has a resilient business model that proactively analyses key risk indicators to achieve continuous improvement in performance. Complex challenges and risks relate, for example, to the unpredictable, uncontrollable and irreversible actions and intentions of competitors and regulators, particularly in emerging markets such as Brazil and China, volatility in currencies and commodity prices, global economic conditions and the ability of Jaguar Land Rover’s suppliers to operate effectively under these circumstances. Here the company cannot rely solely on expertise, process and analysis to provide the right answer, as causes and effects may be initially unknown and irreversible after the fact. Instead it requires a combination of probing the future, sensing the direction of developments, and understanding what is and is not possible in order to quickly and confidently make decisions. To paraphrase a quote by Ratan Tata, Chairman of Tata Group (1991-2012), it is not about “taking right decisions, but about taking decisions and then making them right”. At this level, Jaguar Land Rover’s strategy and enterprise risk management are an integrated exercise in which the company’s Executive Committee Members are actively involved, including: • informally on a continual basis • formally on a monthly basis in a Business Performance Review meeting, and • twice yearly with the Board/Audit Committee in formal Enterprise Risk Management meetings. To be able to timely identify and understand the trends and developments that could indicate the future

Leading organisations have exceptional risk radar and this is central to their resilience, but it is also crucially linked to the other principles. Risk radar is overarching in that it influences the nature of the resources and assets and the relationships and networks . Also, in the event of a crisis, the resources and assets and the relationships and networks need to be aligned so that the organisation has the rapid response capability and subsequently review and adapt in order to learn and innovate. direction of sales volumes and cost bases in all global markets in which Jaguar Land Rover has a presence, and consequently the implications for funding and cash flows, corporate risk managers worked with subject matter experts across the business to identify the key indicating factors. Today, this analysis includes key economic, financial, product and legislative indicators as well as others. Data for pattern analysis is obtained from a number of the company’s databases, insights from 60 to 150 of Jaguar Land Rover’s top leaders working in the key risk areas, studies by professional services companies and other external sources. Drawing on the lessons learned during the difficult times, these risk managers and subject matter experts use the data gathered to ask “ what if? ” questions to understand the business impact of specific changes in key indicators. For example: “ Assume we lose 10 percent of volume, what are we going to do? ” or “ Assume an emerging market changes its fuel duty overnight, making our products less competitive, what are we going to do? ” Although these questions formed the genesis for today’s scenario planning exercises and gave Jaguar Land Rover the ability to, for example, swiftly reallocate vehicles produced for one market to others where they could be sold faster, they also gave insight into the limits, or trigger points, beyond which mitigating actions are required by the Executive Committee. For more insights into resilience at Jaguar Land Rover, refer to the full case study in Appendix A

Case study: Jaguar Land Rover – identify key risk indicators

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Section 7: Implications for risk professionals