How resilient are you and your business?
31/07/2019 , Knowledge
Author: Olu Orugboh
On Wednesday, 10th July, Building Business Leaders of the Future, Cohort 1 came to together to learn how to build a resilient business. The module was introduced by Professor Mark Hart, Director of Aston Centre for Growth and facilitated by Maria Wishart, Research Fellow, Enterprise Research Centre (ERC), Warwick Business School.
Resilience is crucial for the survival of today’s business, given the rapidly changing operating environment.
Factors such as changes in technology, recession, exchange rate fluctuations, pressures on cash-flows, disruptions to the supply chain, and skills gaps can have a huge impact to your business.
Therefore to become resilient, it is vital for business leaders to look beyond the next year and look further ahead to 2030 and beyond, where the market landscape will be radically different across many dimensions, to survive.
The ERC provides a definition of resilience that contained three components
- A Strategic objective – Business leaders must set themselves an objective to become resilient, this is a strategy that will enable their businesses to become strong, survive, prosper and achieve a positive benefit.
- Resilient businesses had the characteristics of being “adaptive, competitive, agile and robust” compared to a less resilient business.
- Having the ability to “bounce back” from adversity and become stronger and more resourceful.
Research shows that:
- Small business are under prepared for crisis and can suffer disastrous consequences
- SME managers tend to “muddle though” and firefight rather than plan
- Resource and capability constraints are real
- Resilient leaders tend to run resilient business
- The leader’s ability to choose the right strategy is key to the business’s resilience
- Self-belief can be crucial in building a resilient leader
Introducing the Small Business Resilience Framework
The Small Business Resilience Framework is a series of interventions and self-use toolkits, developed over a number of years by the ERC. This enables businesses to assess their level of resilience and identify areas of focus that they can use within their business plans moving forward. The framework enables leaders to answer three key questions about their business:
- The Resilience Healthcheck – How vulnerable your business is to change
- The Risk Analysis Tool – What exactly you should be worrying about as a business leader
- Can your business bounce back from adversity? – How to put your crisis plan in place
The Resilience Healthcheck enables business leaders to check both their own individual resilience and the resilience of their business, using a simple and systematic method to identify risks.
Businesses will be exposed to and experience a wide array of changes within the next 5 years. These range from cash-flow issues to recession, disruptions to the supply chain, cyber security issues, skills gaps, changes to regulatory and political environments or losing a big customer.
Research conducted on small firms with 3-99 employees asked business leaders to name the biggest threat their businesses faced in the previous few years. Most common answers included regulatory changes, costs increasing, new competitors and increased competition from existing competitors.
The reality is that no business can operate in isolation, therefore it is vital for business leaders to consistently and routinely scan both the micro and macro environment to proactively anticipate any looming crisis and make the necessary changes in their business to protect its longevity.
Risk planning is often overlooked by small businesses. Some of the reasons stated for this were lack of time, no skills in this area, lack of knowledge of any strategic planning process and it does not apply to their small businesses.
Risk analysis is typically evaluated on the basis of two factors, how likely it is to happen and if it did happen the impact on the business.
This will vary by business and some examples are: total loss or failure of one supplier, loss of a major customer, cyber-attacks, or even economic recession.
As business leaders, it is important to consider the risks in your business frequently and prioritise where to focus effort over the next 12 months.
The final vital stage of the small business resilience framework is for business leaders to commit their plans for those risks that really matter so that if they occurred, they can go to the plan and implement it.
Research shows that small business owners do not have the time and resources to put detailed plans in place. One of the key themes of the crisis plan is that it does not have to be onerous, complex or lengthy. It can be a top line statement of intent, focused on invoking an immediate response to the adverse event.
There are two elements to crisis planning,
- Essential Datafile: This eliminates the risk of businesses trying to find key contacts during a crisis. This document should hold contact details relating to your premises, staff, your systems, your customers and your suppliers. If anything should happen, you have access to this information in one place and can continue with your business without interruption.
- Critical Risk Plan: This enables business leaders to think through the specific steps that they will take in the event of a crisis taking place.
The reality is that crisis can occur at any time, the key is, putting in place the right culture, values, planning, systems and behaviours that will enable your business to respond in a more resilient way.
To survive long term, business leaders must think in a structured way about what is taking place in the wider environment and action these by putting in place simple resilient plans. This means that where crisis or unexpected changes occur these are mitigated against, allowing the business to move forward without interruption. In summary, a little bit of structure can take you and your business a long way