The COVID-19 pandemic has forced companies to adapt quickly to thrive in the face of changing threats. Businesses have learned a lot about the value of remaining adaptable in the short-term, that is, throughout the pandemic. However, the pandemic has revealed a need for a longer-term approach to business that emphasizes resilience. “2020 was a wake-up call,” advises McKinsey. “To thrive in the coming decade, companies must develop resilience — the ability to withstand unpredictable threat or change and then emerge stronger.”
A Long-Term, Multifaceted Resilience Strategy is Needed
Resilience is part of a long game that looks beyond short-term earnings, McKinsey says. What’s more, they write, several factors will be major players, including “the digital and technology revolution, climate change, and geopolitical uncertainty.” Resilience will be necessary to survive in the face of disruptions such as cybersecurity breaches, natural disasters, geopolitical risk, and other sources of uncertainty. Meanwhile, companies must “navigate concerns from their immediate bottom line, together with pressures from governments, investors, and society at large.” Otherwise, without a resilience plan, “surprise gaps” will occur, which are deficits in resilience that threaten companies’ survival. These surprise gaps can include environmental and other regulations, post-pandemic business continuity, supply chain and sourcing issues due to globalization and geopolitical factors, and shifts in consumer demand.
As Madeline Taylor writes for the Institutional Asset Manager blog, in the COVID-19 pandemic, companies haven’t been paying enough attention to geopolitical flare-ups, such as a global technology decoupling and a major cyber-attack. Indeed, COVID-19 has been the main priority for companies, but other issues, such as geopolitical risk, remain just as relevant, if not increasing in relevance. Beyond COVID-19 impacts, the recent Colonial Pipeline hack caused a massive fuel shortage in the south and the eastern United States, and, as Taylor says, “led to a rise in oil prices, and shares in US energy firms went up by 1.5 percent.”
Michael Evans of Forbes observes that though some businesses have performed well in the pandemic, like Amazon and Zoom, most smaller companies have not. The pandemic has highlighted companies’ need to improve resilience in the long-term to boost growth, stay profitable, and remain adaptable.
Ways to Build Resilience
How does a company build long-term resilience to ward off such emerging threats and navigate uncertainties? McKinsey’s approach to resilience involves different components of resilience, such as financial, technological, operational, organizational, reputational, and business-model resilience. They argue that these forms of resilience should be “baked in” to improve the company, not just during times of crisis, but also in more calm times.
Evans suggests focusing on four key aspects foundational to success, including culture, leadership, change, and discipline. Revisit your “mission, values, and vision,” he suggests, and “make sure you have buy-in across the entire organization, clear two-way communication between you and your employees, and agreed-upon accountability.” What’s more, he writes, ensures that culture and strategy are in harmony, so that your company and its employees can “walk the talk.”
Factoring in Corporate Resilience in Mergers & Acquisitions (M&A)
A Mergers & Acquisitions (M&A) strategy can be part of a long-term corporate resilience strategy. Companies can evaluate previous M&A transactions and learn from prior failures to make better decisions in the future. Deloitte states that, in uncertain, chaotic economic times, it’s also important to have a clear vision; consider value drivers such as “segment, geography, and end markets” to help “fortify value creation from the transaction strategy”; and understand how M&A activity may respond to and leverage the trends shaping industries. It’s important to lead with empathy, while also maintaining a keen sense of awareness, to foster corporate resilience.
Though nobody knows what the future holds in our persistently uncertain economic landscape, businesses can prepare for tumultuous times by preparing a resilience plan for the long term. It’s impossible to plan for all disruptions, but companies should seek to audit their crisis response mechanisms and seek to incorporate processes that ensure a baked-in response.