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www.pwc.co.uk/riskresilience
Prosperinera of unc
The case for
Risk Practices:
Adapting to today's risk landscape
May 2012
In association with:
ng in an certainty
r resilience
Contents
1. Resilience:short supp
2. Adapting t
3. Buffers an
4. Brand, trutangible bu
5. Adaptive c
6. Continuing
7. No right an
8 F i h8. Framing th
Welcome topapers on rproduced bthe Univers
s
: A commodity in high demand but ply
to or creating the future?
nd adaptive capacity
ust, reputation: from intangible asset touffer
capacity: the four A’s of resilience
g challenges around resilience
nswers… but a need for closer linkage
h i k ili dhe new risk resilience agenda
o the second in a series of risk and resilience, y PwC in association with
sity of Oxford.
1. Resilience: A commodity in supply
In organisations today we see stressed CEOs, stressed middsheets. The twenty years leading to the financial crisis appeaentire sectors) lived in a win-win world, with traditional conglobal markets, and the first wave benefits of the internet coof increasingly clear signs of danger or even imminent catascombined with heightened turbulence and faster change.combined with heightened turbulence and faster change.
At the same time, greater connectivity has brought new formreduced to simple cause-effect logics and are contagious rat
Enterprise Risk Management (ERM) grew up in the years ofextend its foundations and build on its many strengths, in oand value creation, and create a new framework that links stto the new uncertain environment. Emerging approaches tohighlighted in our first paper in the series titled ‘Black swan
I th fi t ‘Bl k tIn the first paper, ‘Black swans tuto the changing risk environmentreconnecting risk management, sof ‘risk resilience’ as an additiona
In this second paper, we focus onand thrive in an era of uncertaintenvironment. We identify what dtimes and bad and identify emertimes and bad, and identify emera possible future agenda for deve
PwC | Prospering in an era of uncertainty
1 http://www.pwc.co.uk/riskresilience/riskpractices
high demand but short
dle managers, stressed customers and stressed balance ar to have been a bubble in which many organisations (and nstraints on capital hidden by free credit, deregulating onsumer. An entire system appeared to be blind in the face strophe. Now, traditional constraints are back on the table,
ms of risk – global, systemic, emergent – which cannot be her than containable.
f cheap credit. Today, boards and executives are looking to order to strike the right balance between risk management trategy, risk and resilience in a way that’s more appropriate
o resilience are increasingly informing this quest, as we ns turn grey’1.
’ l k d t h i ti di urn grey’, we looked at how organisations are responding t by rethinking traditional control-based approaches and strategy and organisational culture. We raised the concept al tool in the risk armoury.
the case for resilience – the capacity of a firm to survive ty, and navigate through turbulence in the wider business
drives resilience and how it serves the organisation in good rging practices in leading organisations before setting out rging practices in leading organisations, before setting out eloping resilience further.
1
2. Adapting to or creating the
Fi Th i k ili ti
But what is meant by resilience? The term is often used as a‘bounce back’. But bouncing back implies returning to the saresilient over the long term requires something else: the agiitself in response to shifts in its environment.
Figure 1: The risk resilience continuum
Survival Adapta
Risk Per
The phrase ‘bounce back’ already demonstrates a shift in miremoving uncertainty. Resilience accepts shocks will occur aits power of control. This enables boards and executives to bopportunity as well as to the management of downside risk.essential element of sustainable value creation in any busine
“Resilience accepts shocorganisation’s power ofimportant as its power
Resilience not only helps to extend the focus beyond resistalonger-term thinking about new risks and opportunities. Sohere and now. In contrast, resilience extends that frame of r
• First, short-term survival: responding quickly and robu
• Second, adaptation: enhanced awareness of changes inresponse.
• Third, transformation: moving into new markets and
Apple has transformed itself from a computer company to a
PwC | Prospering in an era of uncertainty
pp p p ylessons in resilience that other organisations can learn from
e future?
a synonym for ‘robust’, reflecting its Latin roots from ame position, whereas an organisation seeking to be ility to create and seize opportunities, and to transform
ResiliencePerspective
Transformationation
rspective
indset from the old view of risk management that implied and the organisation’s power of response is as important as bring the benefits of risk thinking to the exploitation of More than ever, the creation of new uncertainties is an ess.
cks will occur and the f response is as of control.”
nce to shocks to include responses, but it also supports ome forms of risk management encourage us to focus on the reference in three perspectives as illustrated in figure 1:
ustly to shocks.
n the external environment and the need for intelligent
creating entirely new experiences for customers.
an indispensable lifestyle companion. It has demonstrated p y pm, as we will see in the pages that follow.
2
3. Buffers and adaptive capac
Resilience introduces two practical frames of responsiveness: the first is the buffer; those margins that provide the breathing-space needed to absorb shocks and mount a considered response. Examples are operational assets that can be realised in a crisis, cash and other liquid assets on the balance sheet, and cash and other liquid assets on the balance sheet, and diversification (of suppliers, customers, sources of funds) to avoid over-concentration of risk. Buffers tend to be tangible assets, although they are boosted significantly by the organisation’s reputation externally. In the immediate aftermath of a major shock, buffers are a pre-requisite for survival.
The second focus for resilience is adaptive capacity;p p y;combining strategic flexibility and organisational agility with a culture that supports learning and renewal. An increasingly important element of adaptive capacity lies in the relationship an organisation has with its customers and supply chain partners. Whereas buffers are pre-requisites for survival, adaptive capacity becomes more important as an indicator of longer term resilience Adaptive an indicator of longer term resilience. Adaptive capacity springs from a blend of diverse relationships beyond the organisation, and tangible and intangible assets that can be managed by the organisation. The trick for a resilient organisation is to take these assets and develop them in a provable manner whilst maintaining their robustness.
Buffers can support adaptation and transformation as Buffers can support adaptation and transformation as well as survival. Apple has recently captured many headlines as its cash balances approach $100bn. In the past there would have been fevered calls for the company to return this cash to shareholders. This was a longstanding cry from investors in Microsoft, for instance, as it built cash through the 1990s. However there is widespread recognition today that Apple’s ‘war chest’ enhances its ability to move quickly into new chest enhances its ability to move quickly into new markets and make game-changing investments in rapidly evolving technologies and customer markets.
As predictability wanes in a turbulent world, so the need for buffers and adaptive capacity increases. The market’s increased appetite to value a company like Apple, that holds strong cash buffers, may be
l d i h h i i d f correlated with the increasing tendency of organisations to withhold detailed profit forecasts in uncertain and volatile trading conditions. A recent report from Standard & Poor’s Capital IQ2 highlighted that only 20% of S&P 500 companies reporting their fourth-quarter results for 2011 had offered an earnings-per-share forecast. This figure was well below the historical average of around one-third, and only
PwC | Prospering in an era of uncertainty
marginally up from 15% in the third quarter of 2009, at the height of the financial crisis.
2 http://www.ft.com/cms/s/0/3d767e04-59bf-11e1-8d36-00144feabdc0.htm
city
Buffers under threat: has efficiency trumped resilience?
Like an athlete who pushes fitness to the point where the immune system is damaged at the risk of
l i f ti i ti h d regular infection, many organisations have pursued efficiency to the point where it could undermine resilience. Highly leveraged balance sheets, concentration of sources of supply or transaction centres and ruthless exploitation of the supply chain, may increase short term profits, but reduce buffers to a point where they may not withstand a shock. Boards should regularly review their operational performance and short term efficiency goals with a view to understanding the trade-off between resilience and efficiency. In the boom years where most growth constraints were absent, many balance sheets often became so over-leveraged that resilience buffers were completely absent, but the cost was deferred until a subsequent shock destroyed all shareholder value. y
Another example can be found in the Eurozone crisis that unfolded in late 2011 – the longer-term profile of the UK’s debt gave it much greater buffers in the financial markets than Spain or France.
“As predictability wanes in a turbulent world, so the need for buffers and adaptive capacity increases.”increases.
ml
3
4. Brand, trust, reputation: frtangible buffer
Investors have always paid a premium over net book value frelationships with their customers. Traditional risk manageundermine the brand, but often doesn’t go far enough to buthe organisation to understand the complex interdependenc
In an era of global supply chains and the rise of the internetamplification of risk through media. When shocks occur todthe interest and outrage of many more actors. This has threecategories; it takes the outcome of the shock further outsidecontrol or not?); and it strengthens the link between short t
As a result, and as we highlighted in the first paper in this seinto stress tests and scenarios and sharpening their crisis morganisations need to be more proactive in managing it for tdetail in our series of papers on Trust3 – ‘Trust: the overlook
“... if reputation is a key... if reputation is a keyorganisations need to bmanaging it for the long
Tylenol, a brand of pain-killer drugs in the US, carried out to deliberate on-shelf contamination. They publicly destroyreleased the drug in triple tamper-proof packaging. As a reregained their market share and took an additional 20% frreassuring new packaging.
In contrast, Maple Leaf Foods experienced a listeria outbreconsumers the organisation was candid and visible in "doingsocial media and for ongoing comment. After the product rimplementing an education and outreach programme expltactic, combined with an incredibly open approach to commas an industry expert regarding this issue.
These highlight how companies with a pro-active and valubuffer to withstand, and even create opportunities, from a
PwC | Prospering in an era of uncertainty
3 http://www.pwc.co.uk/trust/issues
rom intangible asset to
for companies whose brands create longstanding ement seeks to identify and quantify risks that could ild a coherent framework for resilience that would enable cy of brand, trust and reputation.
t, diffusion of power and authority has resulted in the social day, they not only receive global coverage, but also catalyse e impacts: it fuels the potential for risks to cascade across
e the organisation’s control (will the story spiral out of erm events and long-term reputational damage.
eries, many organisations are factoring reputational fallout management plans. But if brand is a key buffer for resilience,
the long term. This is a theme we have covered in more ked asset’ and ‘Trust: the behavioural challenge’.
y buffer for resilience, y buffer for resilience, be more proactive in g term.”
one of the largest product recalls in American history due yed all current product, even untainted stock and re-esult of their fast and consumer focused actions, they
rom their competitors who continued to trade without the
eak in specific product types. In addressing their ng the right thing" via senior public figures available on g g g p grecall, they dealt with the longer term effects by loring the issues related to the contamination type. This munications, has enhanced the organisation’s reputation
es based approach to their resilience have a stronger crisis.
4
Like many other boards, one of our firm’s professional serviusing a series of measures; including share of media voice ameasures have been tracked in isolation from each other anor of the performance of others in their market. The compandashboard. Linked to a database that tracks millions of datarelation to the companies key reputational drivers, reports trelation to the companies key reputational drivers, reports ttrend reporting of reputation in relation to its main market tangible and actionable data in an area that previously relied
It has often been said that one should always look to exploitbelow) demonstrates that organisations that show resilienceshare price outperformance.
Leadership: a critical factor in recovering from ri
In ‘The Impact of Catastrophes on Shareholder Value’4, OxRory Knight and Deborah Pretty find that firms affected byrelatively distinct groups: recoverers and non-recoverers. Winitial fall in market value after the catastrophe, by the fiftirebounded above their pre-crisis level. In contrast, non-recinitially and remained 15% down up to a year after the catinitially, and remained 15% down up to a year after the cat
According to the report, which is updated annually for the elements drive these differing impacts: the immediate estieconomic loss, and management’s ability to deal with the a“Although all catastrophes have an initial negative impact offer an opportunity for management to demonstrate theirdifficult circumstances.”
PwC | Prospering in an era of uncertainty
4 The Impact of Catastrophes on Shareholder Value by Rory Knight and D
ices clients has for many years sought to track its reputation nd surveys of projects and employee experience. But these
nd without a clear indication of target reputational outcomes ny is now compiling a rigorous and integrated reputational a-points from multiple sources, it isolates sentiment in them by stakeholder and by driver, providing real-time and them by stakeholder and by driver, providing real time and competitors. The result is that the board now has access to d on intuition and personal interpretation.
t a crisis, and research (highlighted in the information panel e through a major shock develop a reputation that leads to
isk events
xford University researchers y catastrophes fall into two While recoverers suffered an ieth trading day they had coverers fell more sharply astropheastrophe.
most recent shocks, two mate of the associated
aftermath. The authors write: on value, paradoxically they r talent in dealing with
Deborah Pretty, 2002
5
5. Adaptive capacity: the four
If buffers are pre-requisites for survival or ‘bouncing back’ iprovides the momentum for ‘springing forward’ to exploit oareas. As the diagram below illustrates, adaptive capacity ca
Alignment
• Strategy and risk alignment
• Leadership structures and alignment with incentives
Awareness
• Risk appetite and tolerance
• External stimuli
• Customer and employee experience
• Collaboration with partners and customers
employee experience
• Performance and risk measures
1 2
Although robust qualitative measures exist for all these factalone report or assure them. They require the development deployed (measuring performance across supply chain bounevidence of the quality of learning from risk events and nearpractice to collaborate for inno ation) Interestingl in finapractice to collaborate for innovation). Interestingly, in finapreviously ignored measures, with an overt attention to cultthey specifically look for these indicators.
“... adaptive capacity prp p y pfor ‘springing forward’ opportunities rapidly, bnew business areas.”
PwC | Prospering in an era of uncertainty
r A’s of resilience
n a turbulent and uncertain world, adaptive capacity pportunities rapidly, both in existing and new business
an be analysed across four dimensions.
Ability
• Appropriate diversity
• Learning from experience
• Internal networks
i d h bi
Agility
• Simplicity trumps complexity
• Continuous improvement culture
• Strong communities • Routines and habitsStrong communities of practice
• Consistency and transparency
3 4
tors, few existing risk frameworks incorporate them, let of measures that are both broader than those traditionally ndaries and across organisational silos) and deeper (seeking r misses and the effectiveness of internal communities of
ancial ser ices regulators are increasingl focusing on these ancial services, regulators are increasingly focusing on these ture through requirements such as the ‘show me’ test where
rovides the momentum to exploit both in existing and
6
In our conversations with clients that are seeking to developapproaches are taking hold in practice:
Collaborative relationships – Collaboration both Collaborative relationships – Collaboration, both important as resilience cannot be defined or achieved osectors including banking and oil and gas have demonsresilience across a whole industry and along its value chcollaborators in digital music, technology and sports (wcollaboration as a source of adaptive capacity, by calminsustainable value.
1
Making a tune out of the noise – In complex organican be key. Conversation is the key adaptive mechanism conversation pivots on combining numbers and narrativas well as measurement. Strategy is the most expensive ‘confusion between precision and accuracy as well as overconsider how decimal points can kill a conversation! Whmanagement grapples with values, culture and perceptiostems from intuition (i.e. seeing and realising new oppor
2
( g g ppcapitalist or business angel and they will tell you how theresilience involves combining intuition, imagination andattention to narratives in attending to the quality of stratBoardroom.
For example in one mining organisation, there were 36 dfunctional and geographic boundaries. Nine box grids corisk and some net. Each described different risk categoriginternal boundaries and risks. Resilience is undermined risk. At this company, not only did they take one framewdidn’t matter which they picked so long as they picked jurisk events to share stories and lessons across the busineabout encounters with lions across the campfire.
This focus on stories can be linked to the increasingly pthe future. Often today, scenarios are highly technical ametaphors, the scenario can be brought to life more vivunderlying views that have informed the current consenand disagree with the established narrative, embracingand the future.
Strengthening tone from the top – Recent events haemployees can inflict, not just on an organisation’s reputaof resilience is for boards to set a clear example of ethical b
3of resilience is for boards to set a clear example of ethical bcompliance culture supported by ongoing monitoring. Livformidable challenge for any business, but today’s constanorganisation seeking to be resilient. PwC’s report, ‘Tone fr
PwC | Prospering in an era of uncertainty
5 http://www.pwc.co.uk/forensic-services/publications/tone-from-the-top-j
p resilience in these dimensions, four innovative
within and beyond an industry sector is all the more within and beyond an industry sector, is all the more only at the level of the individual business. Recent events in strated how a crisis impacting one business can undermine hains into other sectors. At the same time, the success of
with initiatives such as Nike+) show the benefits of ng turbulence and creating new opportunities to create
isations, the quality and scope of the strategic conversation in social systems and organised life . The quality of strategic
ves, and in giving attention to decision making and outcomes ‘story’ of all and the necessity of numbers can result in rwhelm intuition and create a false sense of certainty. Just
hilst risk analysis pivots on the quality of the numbers, risk ons. Entrepreneurialism – the ability to create the future –rtunities, before they can be quantified). Talk to any venture , y q ) yey look for the persuasive story, not just the calculus. Risk d analysis and matching the necessity of numbers with tegic conversation across the company, not just in the
different risk identification models across business, oexisted with six, eight and four box grids. Some used gross ies differently. Increasingly, shocks cause an impact across y g y p by the lack of a common language and mental model for
work, toolset and vocabulary and impose it globally (it almost ust one), they also started using write-ups of near misses and ess in much the same way as our forebears shared stories
popular use of scenarios to 'stress test' the consensus view of and based on quantitative analysis. Using stories and vidly. This encourages participants to 'play around' with the nsus; within the story it becomes legitimate to challenge
g disagreement and providing new ways to see the present
ave highlighted the damage that unethical behaviour by ation, but also its licence to operate. So an important element behaviour as well as embedding a strong ethics and behaviour, as well as embedding a strong ethics and ving up to principles of trustworthy conduct and integrity is a nt global scrutiny means it is a prerequisite for any rom the Top’5 provides some practical pointers for change.
july-10.jhtml
7
Attend to strategic trade-offs – A recent PwC reviea common theme across events, irrespective of industrystrategic trade-offs inherent in critical decisions, and hocommunicate strategic priorities, but ignore strategic trunderstand a long list of priorities can magically deliverstrategies will contain a number of potential dilemmas,
4
strategies will contain a number of potential dilemmas,made. The important task for leaders is to work throughadaptive capacity that will serve the individual decision
This approach focuses on making sense of strategy andignorance and rests on the capacity to readjust rather thon managing disagreement as an asset and on being abimportant than in the boardroom, but this is the venue directors can produce orchestrated theatre, rather thand ecto s ca p oduce o c est ated t eat e, at e t aTomorrow’s Company6).
In managing disagreement as an asset, it is important fthe face of uncertainty, forcing consensus on people wilinevitable that people will disagree and even make mistfrom, then the organisation will not take the right level
Dilemmas and trade-offs
In the quest for resilience, companies need to confront ma
Where to pursue W
Where to pursue efficiency, and where
to tolerate redundancy to create buffers
rec
Where to embrace new behaviours, and where to stick to core values
Where to compete with other organisations, and where to
h t ll b t ith th Where to grow o
h t choose to collaborate with them –potentially with the same
organisations
where to pursacquisition
Throughout this section we have emphasised the importancorganisations to increase and improve the level of discussionwhere the flow of dialogue is directed through restrictive buthe boardroom of Apple where the habits and routines assochis biography, Steve Jobs is quoted as saying “People who k
PwC | Prospering in an era of uncertainty
6 Tomorrow’s Company – Improving the quality of boardroom conversatio7 Steve Jobs: The Exclusive Biography by Walter Isaacson, 2011
ew of high impact, low likelihood risk events concluded that y, was the failure of key decision makers to understand the ow to resolve them. Executives frequently work hard to rade-offs in the mistaken belief that employees who r against all of them, all of the time. In reality, most , where judgement needs to be exercised and trade-offs , where judgement needs to be exercised and trade offs h and debate these trade-offs with their teams; building
n makers well in the moments that matter.
risks in a way that engages with uncertainty, recognises han control. The quality of strategic conversation is based le to ask better questions. Nowhere is this skill more where the different roles of executive and non-executive
n safe and open dialogue (as discussed in a recent report by sa e a d ope d a ogue (as d scussed a ece t epo t by
for organisations to make space for conflicts and failure. In ll not work. Wherever trade-offs and dilemmas arise, it is takes. If conflicts and failures are not accepted and learnt of risk.
any dilemmas, including choices about:
Where to impose control, Where to focus on p ,and where to foster
improvisation in esponse to a changed or changing environment
fspecialisation in capabilities,
and where to build and manage a portfolio of
contrasting capabilities
When to invest in expanding ifi biliti d h t
organically and th b specific capabilities and when to
run down or divest themue growth by
n – or both
ce of dialogue. Software such as Powerpoint is often used by n. The art of conversation can be undermined by these tools
ullet points on limited topics. One response to this is within ciated with presentation software are reportedly banned. In
know what they’re talking about don’t need PowerPoint.”7
ons
8
6. Continuing challenges arou
While our aim is to shine a spotlight on the sources and impThe difficulties are underlined by the wide array of challengthe most pressing.
How wide is the f
Consideration of options for survivaThi i li ki h h scope of
resilience?This requires linking together the pin acknowledging and embracing unlandscape within which the organisacontribution to strategic, risk and opeach rather than manage it as a sepa
The ‘curse’ of foresight
Boards do not have the benefit of hirehearse the impact of a different fufutures that they are most comfortanecessarily a good guide to the futurto advance loans based on high mulfor their caution.
Does resilience have a value…?
If resilience can be measured, it makassertion is supported by evidence isheets in times of turbulence. But hfrom an intuitive one to an empiricaparticular interest in the resilience ocompany’s pension fund. Pension trcovenant of the employer in the schcovenant of the employer in the schfunding requirements.
… and if so, how should it be quantified?
If resilience has financial value, thenwhom? The fact that resilience requmanagement is willing to trade off srightly or wrongly often focus on shrightly or wrongly often focus on shgenerates higher immediate returnsout the extra value ascribed to its m
Who’ll pay for the buffers?
Until a risk strikes or opportunity binefficiency – so management may hbuffers when competitors appear top ppneeds to be paid for and should havusually been driven by herd mentali‘Internet strategy’ saw their share p
PwC | Prospering in an era of uncertainty
und resilience
pacts of resilience, we don’t pretend to have all the answers. ges that remain around this whole area. Here are some of
al, adaptation and transformation is central to resilience. f i k i i d HR A d rocesses of risk, strategy, communications and HR. And
ncertainty, resilience vastly expands the context and ation takes decisions. So resilience is an important perational management and the key is to integrate it into arate process or bolt-on.
indsight when making decisions. What they can do is uture. The problem is that they tend to rehearse the able and familiar with. And the comfortable past is not re. In 2007, a handful of mortgage lenders were refusing ltiples of salary. At the time, some analysts criticised them
kes sense that it can be valued by investors. This intuitive in that markets turn to ‘safe’ stocks with strong balance ow far should the link between resilience and value move al one? Are there some long-term stakeholders that have a of companies? For instance, employees and trustees of the rustees will take account of resilience when addressing the
heme funding negotiations potentially resulting in lower heme funding negotiations, potentially resulting in lower
n can a precise number be put on it? If so, how? And by uires ‘buffers’ of apparently redundant capacity suggests short and long term advantages. However, investors ort-term returns If a less-resilient higher-risk business ort term returns. If a less resilient, higher risk business s, won’t the value ascribed to those higher returns cancel
more resilient competitor?
eckons, the buffers that support resilience can look like have difficulty convincing shareholders to fund these
o be doing fine without them. Similarly, adaptive capacity g y p p yve a value. However, attempts to value future agility have ity. Around 2000, media companies that announced an rices leap – only to slump back down in the dot.com bust.
9
7. No right answers...
There’s no one-size-fits-all approach to resilience, and no ‘rdegree to which divergent opinions are its lifeblood: an orgafrom failure and link different assets and processes throughwith rigorous analysis, will be well-placed to exhibit resilien
What’s clear is that, faced with today’s pervasive change andpurely on a risk management approach that uses historical compared with resilience is the equivalent of classical music
In the classical orchestra, the score (or strategy) is handed dand the conductor’s ability to get them to stick to the ‘scriptthe parts. There is no central conductor to hand out the stracontributions of the musicians. Of course they must also attsurvive by playing for themselves!
“Risk compared with reequivalent of classical mimprovised jazz ”
b d f l li k
improvised jazz.
… but a need for closer linkage
However, jazz players must still be technical masters, and pavailable – they are looking at information of sufficient qualgenerate insights; and seeing the stories behind the number
Businesses can use a number of proven techniques to help aconsequence-testing of the potential outcomes of an unknowresilience, boards must closely interlink their key internal p, y y pmanagement, and reward – while also connecting top manathe fringes of the organisation.
Organisations that understand these linkages are starting torisk indicators. They are measuring behavioural indicators amore on predictive indicators than the lagging indicators thusing the required quantification of risk appetite and tolerafreedom, barriers and limits alongside traditional financial
PwC | Prospering in an era of uncertainty
right answers’ to the dilemmas it raises. Indeed, there’s a anisation that can manage disagreement as an asset, learn h a provocative strategic conversation combining intuition nce.
d uncertainty, it’s no longer enough for organisations to rely corporate data to predict future events and impacts. Risk c versus improvised jazz.
down from the top. Mastery rests in the individual players, t’. In improvised jazz, the tune emerges from the interplay of ategy, but it emerges bottom-up from the complementary tend to wider feedback from each other, unless they can
esilience is the music versus
play in the right key. What boards can ensure is that – where lity and about the right things; using the right processes to rs.
achieve this, such as real-time crisis simulations and wn event. But more is needed than new tools. To achieve
processes – risk management, strategy, performance p g , gy, pagement’s agenda with experiences and perspectives from
o change what they measure as key performance and key and process measures as well as financial ones, and focusing
hat have previously provided false confidence. And they are ance to clarify and cascade measures to the front line about delegations.
10
8. Framing the new risk resili
Our aim in this series of papers is to help businesses, regulaWith this in mind, there are three outstanding questions thawill keep working to address:
• In a world where collaborative strategy is likely to deliveorganisations draw the line between collaboration and co
• Resilience has contingent future value but quantifiable c
• In the absence of a Chief Resilience Officer, how should waccountabilities of leaders?
In this paper, we’ve shown that resilience is a vital addition eliminate the stress that organisations and executives feel inaccepted as a friend and worked with skill to reduce risk and
In our next paper, the third in the series, weresilience is being pursued at an industry le
PwC | Prospering in an era of uncertainty
ience agenda
ators and governments grasp the risk resilience agenda. at we think organisations need to confront – and that we
er as many benefits as competitive strategy, how can ollusion?
current cost. How should its value and cost be compared?
we incorporate measures of resilience into the
to risk management – and that whilst resilience may not n today’s more turbulent world, it enables uncertainty to be d increase value.
e’ll look at how evel.
11
Mark DawsonPartner, PwC
Contacts
Martin CaddickDirector, PwC
,Governance, Risk & Compliance Leaders
+44(0) 207 213 [email protected]
,Business Resilience Leader
+44(0) 207 804 [email protected]
Richard SykesPartner PwCPartner, PwCUK Governance, Risk & Compliance Lea
+44(0) 207 804 5466 [email protected]
Dr Angela WilkinsonS ith S h l f E t i d th Smith School of Enterprise and the Environment, University of Oxford
PwC | Prospering in an era of uncertainty
ship Team
der
12
Black swans turn greyhttp://www.pwc.co.uk/ri
Acknowledgements
We'd like to thank all the individuals who participated in ouworkshops and those that shared their views on risk and rehelp us shape this paper. In particular, we'd like to thank Dp p p p p ,Wilkinson from the Smith School of Enterprise and the Envfor her stimulating and thought provoking contributions anchallenges to our thinking as we developed this paper.
PwC firms help organisations and individuals create the value theyclose to 169,000 people who are committed to delivering quality inyou and find out more by visiting us at www.pwc.com.
This publication has been prepared for general guidance on matteYou should not act upon the information contained in this publicatirepresentation or warranty (express or implied) is given as to the apublication, and, to the extent permitted by law, PricewaterhouseCp , , p y ,or assume any liability, responsibility or duty of care for any consereliance on the information contained in this publication or for any
© 2012 PricewaterhouseCoopers LLP. All rights reserved. In this dlimited liability partnership in the United Kingdom), which is a memmember firm of which is a separate legal entity. HB-2012-03-14-09
yiskresilience/riskpractices
ur series of silience to
Dr. Angela gvironment, nd
y’re looking for. We’re a network of firms in 158 countries with n assurance, tax and advisory services. Tell us what matters to
ers of interest only, and does not constitute professional advice. ion without obtaining specific professional advice. No accuracy or completeness of the information contained in thisCoopers LLP, its members, employees and agents do not acceptp , , p y g pequences of you or anyone else acting, or refraining to act, in
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