If the word “turbulence” sounds familiar, it’s because we live in one of the most volatile times in modern history. The COVID-19 pandemic created significant challenges for supply chains and relationships with third parties, which in turn had a ripple effect on the market and the organization’s ability to provide products and services.
Recently, there have been two famous examples in the Asia Pacific region alone Most notably KPMG To illustrate the vulnerability of these supply chains to disruption: some semiconductor manufacturers will not return to full production capacity for two or three years, creating new pressures for a wide range of technology-oriented industries. Furthermore, the high demand for bicycles has led to a partial shortage of equipment across the region, which has disrupted transportation networks.
By looking at the impact of this disruption, we can see that operational resilience is essential for organizations to prevent mass disruption. The good news is that it is achievable. It just means that as governance, risk and compliance challenges are constantly changing, the continued rise of new regulations also requires the implementation of a robust integrated risk management plan.
Why do we need operational flexibility?
according to GartnerOperational resilience is defined as “initiatives that extend business continuity management programs to focus on the impacts, associated risk appetite and tolerance levels for disruption of product or service delivery to internal and external stakeholders.”
So how did operational resilience suddenly become a hot topic? The pandemic, border tensions, cyberattacks, and operational failures have prompted organizations to identify the most critical business services, consider vulnerabilities that are broader than cyberattacks and IT failures, and define a coherent approach to preventing, adapting, and responding. In essence, operational flexibility provides a guarantee of protection against various incidents that can arise within the organization. Those threats, such as the pandemic, have made building this framework even more vital.
Recently we have learned a lot about the way the world works under stress. First, we need to be able to look at which processes are being used at work, which are still useful, and which are broken and need to be changed. The frequency of manual processes within companies continues to shrink, especially when considering the huge number of organizations that have a hybrid or work-from-home model. While these changes may seem overwhelming and perhaps somewhat uncomfortable, they are the root cause of what operational flexibility is. The ability to pivot in times of change, while demonstrating grit and determination, will lead to positive adoptions when a shift is unexpected. Small amounts of progress quickly lead to noticeable change at scale, which will prove beneficial to the organization from top to bottom.
Achieving operational flexibility through risk management
One of the first steps in achieving a robust operational resilience plan is to understand the scale and speed of interrelated risks that exist within the organization, as well as those of third parties. After that, the switch to automated processes can be made. The application of AI technology has come to the fore for organizations that want to make their routine operations – whether their financial, human, marketing or otherwise – as efficient as possible. However, human intelligence is still dominant, especially when it comes to logical decisions, due to the immediate proximity to the process at hand.
AI also allows multiple risks to be managed simultaneously, which becomes particularly prevalent in times of chaos. In contrast, the uncontrolled manual process of risk management can lead to little or no progress.
Finding stability in times of chaos
Speaking of managing multiple risks at the same time – what happens when conflicting regulatory priorities come to the fore? As noted in a report on the Asia Pacific Regulatory Environment by Deloitte, there are a slew of new and rising regulatory challenges that organizations face: “Many topics relate to resilience and sustainability,” Report notes. “Responding quickly to changing landscapes; to meeting market events with minimal disruption to service; and working towards the long-term sustainability of their business models. We also consider the upcoming challenges posed by the application of new technologies and the looming threat of climate change.”
For this reason, an organization is bound to face a dilemma when considering which organization to sort through first. But not only do global companies need to be constantly aware of these regulations, but a comprehensive look at the regulatory requirements will reveal previously hidden problems. Once again, AI can create a common risk platform that leads to a single number that evaluates an organization’s risk view. Outside of AI, organizational priorities can be addressed within boards of directors, where executives can build workable risk management solutions while building a consensus view of their risk management landscape.
Even when the best risk management plan is considered, many external threats can emerge, such as security breaches and ransomware attacks. Although there is no inherently perfect risk management plan, a carefully designed and properly implemented solution is the best form of crisis management for an organization.
Looking to the future of operational flexibility
An integrated risk management approach is fundamental to achieving operational flexibility no matter what type of business you lead. As governance, risk, and compliance (GRC) solutions become more complex, data is gradually moving from qualitative to quantitative. This means that information that used to be complex and difficult to sort is now easier to understand and translate into action. Again, AI can’t do much on its own – people must keep active participation in the risk management process. For example, it is important to engage the front lines, because they are often your first line of defense. You need to provide them with the physical tools to adhere to all compliance and regulatory policies. Moreover, the combination of digital platforms and artificial intelligence allows risk leaders to interpret and learn from data, highlight patterns, and influence specific tasks and outcomes.
If it is not clear now, a robust risk management solution is the backbone of being operationally agile. With the proper processes in place to mitigate and attack risks before they become a real threat, the potential for chaos in the aftermath of a crisis becomes much lower. The pandemic is just one example of how companies are derailed when issues such as defects arise in the supply chain.
Although decisions about managing growing threats or potential attacks and compliance issues may seem overwhelming, the truth is that achieving operational resilience is not as far-reaching as it was once envisioned for organizations. Integrated risk management becomes the key to achieving operational flexibility and helping you turn volatility into order.