Operational resilience refers to an organization's ability to continue providing products or services while dealing with unexpected internal or external disruption. This area of risk management and disaster response also involves anticipating such events and either preventing them or creating an effective response plan.
Different factors can affect operational resilience. In addition to a robust risk management plan, an organization needs financial flexibility and operational resources to adapt to new environments, withstand challenges, and recover quickly from setbacks.
Here is a closer look at the importance of operational resilience and the considerations necessary to implement a plan to continue operations when confronted with hardships and setbacks.
Why Is Operational Resilience Important?
Businesses face a variety of risks, including cyber attacks, health emergencies like COVID-19, natural disasters, supply chain disruptions, and financial system problems. Though all of these specific problems may not occur, companies will eventually have to deal with one or more of these crises at some point.
As a way to respond to these crises, businesses must build an operational resilience plan. It ensures businesses stay prepared for and able to respond to any disruptions or threats that may arise. At the very least, a plan outlines proactive steps that the company can take to recover.
A well-planned crisis response can do more than streamline the recovery effort. Here are some additional benefits you can expect with a plan for operational resilience.
- A company may be able to maintain some or all of its operations while dealing with the issues.
- Revenue can continue to flow, allowing the company to cover payroll and operational costs.
- The ability to continue operating during crises can help the company's reputation and earn trust from customers.
- In some sectors, such as banking, companies need an operational resilience plan to comply with risk management and operational continuity planning rules.
Without a plan in place, a company risks a complete shutdown when faced with a disaster.
How Does an Operational Resilience Plan Work?
As mentioned, an operational resilience plan details the processes and procedures for responding to disruptions and outlines steps companies can take to mitigate risks before a crisis occurs.
These plans typically cover different aspects of a company's operations. It looks at processes, technology and information systems, employees, products or services, supply chains, and third parties necessary for business operations.
The plan covers how each of these components can keep operating during a crisis and how the other elements need to adjust should one become inoperable.
Other aspects of the plan include communication and decision-making protocols, which will automatically go into effect. These aspects of the plan are part of a framework that maps out the response and recovery efforts. In other words, an operational resilience plan improves efficiency, as the company does not need to waste time rewriting the framework of business operations as a response.
How To Build Operational Resilience
While organizations can build their operational resilience plans differently, there are some common steps that every company can use regardless of their industry or size.
The first step is to define the critical functions of the business. These typically focus on revenue-earning activities like manufacturing a product or providing a service. The subsequent plan will focus on keeping these activities going during the response and recovery efforts.
Assess Possible Weak Points
If the organization should assess possible weak points, the operation should include a plan to reinforce these areas or otherwise mitigate the risks they pose. These can include both internal and external vulnerabilities. For example, a manufacturing business might be vulnerable if employees are unable to get to work, and suppliers cannot transport raw materials to the factory.
It is also essential to assess the operational resilience plan itself for weak points. Errors and miscalculations can make the operation’s response less effective.
Here are some common problem areas for disaster preparedness plans.
- Lack of clear communication protocols,
- Incorrectly identified risks,
- Poor incident response planning,
- Inadequate training for personnel,
- Poor data backup and recovery procedures,
- Lack of a comprehensive risk assessment,
- Weak security measures,
- Plans that do not account for external variables like suppliers and third-party service providers.
The company should also continuously assess the risks because they may change as the company alters its operations or makes mitigation plans in other areas.
Create a Holistic View
A holistic approach to operational resilience entails considering both internal and external factors. The response framework should take the links between different aspects of the business into account. For example, a company needs a contingency plan if third-party suppliers or contractors are unable to fulfill their duties during a disaster.
This step details how the different aspects of the business affect each other. It also shows how the response in one area could positively or negatively affect the efforts in another area.
A holistic approach considers primary processes, employees, management, and suppliers. It also looks at assets, current operational risk management systems, business continuity plans, and administrative functions.
By looking at the big picture, a business can define potential risks and threats related to the interdependence between different aspects of its operation.
Design a Comprehensive Plan for Risk Assessment
Next, design a comprehensive plan for risk assessment and management. Risk assessment involves identifying, assessing, and managing the risks associated with a particular activity or process. However, identification is only the first part of the process. You should also evaluate the severity of the risk and measure its impact on critical operations.
Assessment is essential because it ensures that the operational resilience plan will actually address the biggest risks. It will help you avoid a situation where unforeseen problems hamper response and recovery efforts.
An assessment does more than define risks. It also details mitigation strategies. In addition to a framework for the response, it includes resources, assets, and capabilities needed to carry out the plan.
Finally, the risk assessment needs to define methods for monitoring and evaluating the response and setting benchmarks for the return to normalcy.
Perform Resilience Testing
A company can perform resilience testing before an emergency occurs. This process involves simulating a variety of real-world scenarios. The business may test for possible cyber threats, physical threats, disasters, or other likely disruptions.
You can perform a risk analysis to decide which threats to consider during the test phase.
By simulating the different scenarios, businesses can identify errors in their plan and correct them without any real consequences.
