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Thursday, June 24, 2021

    Risk And Organisational Resilience In Times Of COVID-19 Crisis

    What we are currently facing is a totally unexpected and turbulent change. A ‘Black swan’ event that has locked crores of people in their homes, closed service organizations, manufacturing and agriculture halted, supply chains disrupted, and causing an unprecedented exodus of jobless workers to their villages, nightmare scenarios majority of the organisational leaders never imagined.

    Author Nassim Nicholas Taleb who coined the term ‘Black swan’ warned, “Our world is dominated by the extreme, the unknown, and the very improbable … while we spend our time engaged in small talk, focusing on the known and the repeated”.

    Climate change, all forms of ecological disasters and emerging infectious diseases are the new reality, with the potential to disrupt the economy and cause untold human sufferings. A ‘Black swan’ event has three attributes. First, it is an outlier, as it lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact.

    Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. This is a risk, the effect of uncertainty. Uncertainty is the state, even partial, of deficiency of information related to, understanding, or knowledge of an event, its consequences or likelihood.

    In an interconnected global economy, major disruption like novel coronavirus (COVID-19) can cause significant financial losses for all kind of organisations and untold misery to people. The problem is the potential risks of disruptions are often hidden, and the potential impacts may not be understood by the decision-makers.

    Organisations need to improve how they deal with such unexpected events. Cultivate resilience by understanding their vulnerabilities and developing specific capabilities to compensate for those vulnerabilities. As individuals, we know that resilience is the process of adapting well in the face of adversity, trauma, tragedy, threats or significant sources of stress.

    For building resilience, people can develop in themselves: (a) The capacity to make realistic plans and take steps to carry them out; (b) A positive view of self and confidence in one’s strengths and abilities; (c) Skills in communication and problem solving; (d) The capacity to manage strong feelings and impulses.

    But, how do organisations cultivate resilience? J. Fiksel in an article ‘Sustainability and Resilience: Toward a Systems Approach’, defined resilience as “the capacity of an enterprise to survive, adapt and grow in the face of turbulent change.” Organisations can try to emulate some of the behaviours seen in man and nature to survive, continuous adaptation and exploitation of opportunities created by disruptive forces.

    Resilient organisations do not fail in the face of disruptions, rather, they are prepared and they adapt.  In an article in the Harvard Business Review in 2003, Gary Hamel and Liisa Valikangas described the quest for resilience as seeking “zero trauma.” We all know seeking “zero trauma” is not realistic during this global health and economic crisis.

    Organisational resilience means understanding the organisation, its context, its objectives, planning well, emergency preparedness and response, improving the adaptability of supply chains, collaborating with stakeholders and leveraging information technology to assure continuity even in the face of the catastrophic disruption.

    Early adopters of resilience thinking have already demonstrated how they can augment traditional risk management practices with new capabilities that help them to anticipate, prepare for, mitigate and recover from disruptions. In many cases, they are able to treat disasters as opportunities for gaining competitive advantage.

    During the 2010 eruption of the Eyjafjallajökull volcano in Iceland which grounded passenger flights and air cargo shipments, the international courier company DHL had an emergency plan in place. It rapidly redirected 100 flights from its hub in Leipzig, Germany, to destinations in southern Europe that were less affected, and also to shifted many deliveries to ground vehicles. Ultimately, DHL was able to avoid significant financial impact while strengthening its customer loyalty.

    Stories are now emerging from China of such resilient organisations. While most manufacturers in China were only just beginning to restart production after “back-to-work” day of February 21. The Haier Group, one of the world’s biggest home appliance manufacturers, already had its factories operating at full capacity by end of February, thanks to its preparedness and new organizational structure.

    The organizational restructuring started in 2012 by Haier, made it agile and well prepared for the shock of COVID-19 crisis. Haier CEO Zhang Ruimin has always been obsessed with breaking the bureaucracy, and he is famous for saying “successful companies move with the times”. CEO Zhang issued the mid-level managers an ultimatum – either choose to be fired or become independent entrepreneurs.   

    Bureaucratic organizations tend to become less resilient as they grow bigger and more complex. The organizations that will survive shall need to improve the decision-making process, plan well ahead to deal with the supply chain disruptions and complexity so that they can cope with an unexpected change like the COVID-19 lockdown. Identifying latent opportunities in the risk landscape will enable an organisation to exploit those opportunities faster than its competitors.

    How do we handle risk in turbulent times — the effect of uncertainty? Balance risks and opportunities; analyse and prioritize risks. Then, plan actions to address the risks, to avoid, eliminate or mitigate risks. Implementing the plan and taking action. Problem is that most of the time we fail to plan well. Traditional risk management is predicated on the goal of returning to a stable operating condition, risks represent potential deviations from this “normal” state.

    Events such as earthquake or floods or epidemic are seen as unwanted deviations from the “normal” state of affairs. International Organisation for Standardization (ISO) now encourages the concept of “risk-based thinking” as part of all management systems. Risk-based thinking requires organisations to understand their context and determine risks as a basis for planning. Risk-based thinking makes preventive action part of strategic and operational planning. It requires determining external and internal issues that are relevant to its purpose and strategic direction, and addressing risks and opportunities that can affect product or service conformity.

    Nowadays, many large private and public sector organisations have adopted systematic approaches to managing their risks, including insurance, to prevent adverse economic, health and environmental impacts from emergency situations. Because the costs of being slow to the sense of threats and opportunities in these turbulent times can be devastating.

    The importance of occupational health and safety (OH&S) management system was elevated by a number of high-profile industrial incidents, including leakage of poisonous methyl isocyanate gas from the Union Carbide plant in Bhopal in December 1984, which killed 5,295 people and crippling thousands for life. Other industrial disasters — major fire incidents in IOC Terminals at Hazira and Jaipur, the blast in NTPC Boiler plant in Rae Barelli brought to the fore the importance of hazard identification and risk analysis.

    Further motivation came from standards set by organizations such as the ISO and the WHO.  For the management of change, the organisations should identify OH&S hazards and risks associated with COVID-19. For determining controls or for considering changes in existing controls, consideration shall be given to reducing risks according to the following hierarchy: (i) elimination; (ii) substitution; (iii) engineering controls; (iv) signage/warnings and/or administrative controls; (v) Personal protective equipment (PPE).  It should be noted that the PPEs are the last line of defence.

    WHO as part of its Global Influenza programme published in 2018: A Checklist for pandemic influenza risk and impact management. The document Introduction page stated: “A pandemic is the worldwide spread of a new disease. Influenza pandemics are unpredictable but recurring events that can significantly affect health, communities and economies worldwide. Planning and preparation are critical to help mitigate the risk and impact of a pandemic, and to manage the response and recovery. Influenza pandemics occur when a new (novel) influenza virus emerges against which people have little or no immunity, and spreads around the world.”

    The purpose of this document is to help national authorities to develop or revise national pandemic influenza preparedness and response plans, in conjunction with the 2017 WHO pandemic influenza preparedness framework. It is “essential” to develop or revise a national pandemic response plan as part of a multi-hazard public health emergency plan. It also underscores multi-sectoral and multidisciplinary approaches to pandemic preparedness planning.

    The WHO document advised: “Knowing who will do what, when, and with what resources is critical to managing a pandemic situation. Successful operations occur when actors know their roles and responsibilities, understand how they fit into the overall plan and how to work together, and have the capacities and resources to implement the plan. To achieve these objectives, all stakeholders need to be involved in the planning process – the process is as important as the plan itself.”

    We should recognize that every disruption represents a learning opportunity that may suggest shifting to an improved state of operations. Resilience thinking is not a substitute for risk management and emergency preparedness. Rather, it is an ongoing process that enables organisations to embrace change in a turbulent and complex environment by expanding their portfolio of capabilities, having technology in place, smart policies around remote work, ability to anticipate supply chain disruption and remove operational roadblocks.

    Establishing a culture of resilience will help organisations to anticipate, prepare for, respond to, adapt and recover from, and to thrive in this age of disruption where new diseases and other forms of ecological disasters are the reality.

    The writer works independently as a Quality Management consultant and has implemented ISO Quality Management System, Environmental Management System, Occupational Health and Safety Management System and Energy Management in scores of service and manufacturing organisations. 

    He teaches Human Resource Management at post-graduate level in Gauhati University, a visiting faculty at Assam Administrative Staff College and trainer with many other public and private sector organisations. 

    The views expressed by the author are personal and may not in any way represent those of TIME8.

    Photo credit: mirror.co.uk



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    First published