Skip to content Resilience is a skill that is in high demand these days, but this is nothing new. Companies have traditionally had to deal with two kinds of disruption. First, there are huge events that are not unprecedented but are nonetheless unpredictable, such as the Fukushima accident or COVID-19. The second category include well-known disruptions like climate change, which occur gradually and entail more uncertainties like how the world will reach net zero, which technologies will succeed and fail, and which new ventures will prosper and which will fail.
If businesses are to prosper in an unpredictable environment, they need to be able to withstand both types of disruption. As they navigate one of the most turbulent and uncertain times in recent memory, CEOs, executive teams, and boards of directors should prioritize building resilience.
Prominent corporations adopt a holistic methodology that encompasses resilience in the supply chain, operations, and strategy in addition to controlling environmental risks to tangible assets.
Strategic resilience in business
Every strategy is developed in the face of some degree of uncertainty, which could hurt a company in a number of ways. Underconfidence can paralyze businesses, while overconfidence can cause corporate myopia. In either case, action can be postponed until it is too late to avert a negative consequence.
It’s rare for companies in a transforming industry to be blindsided by change. Often, they fail to set a strategic direction that adapts to shifting conditions. Leading firms envision customer needs decades ahead, setting long-term visions free from current constraints. They plan with a long-term focus, while continuously adjusting to changes.
Even companies that invest in long-term planning often overlook “corner scenarios”—unlikely but possible events like policy shocks or losing access to capital. Ignoring these high-risk scenarios is increasingly shortsighted. Stress testing a company’s capabilities is vital for understanding the implications and opportunities of low-probability, high-risk scenarios.
Operational resilience in business
Long-term commercial survival depends on operational resilience, particularly in the quickly changing regulatory and environmental world of today. Reducing emissions from Scope 1 and 2 is essential for this. By lowering the chance of being perceived as significant carbon emitters, it assists businesses in avoiding more stringent laws or carbon levies and preserving their social license to operate. Long-term viability can also be improved by modernizing assets to reduce emissions and increase their operating lives. Investors will see these initiatives as an indication that the business is dedicated to sustainability and can adapt to changing conditions.
Beyond operational robustness, businesses need to make sure their decarbonization initiatives are flexible. In this context, resilience refers to the capacity to endure not only severe weather conditions but also unpredictability in other areas such as economic downturns and technology advancements. While some businesses are moving quickly to become market leaders, others are taking a more measured approach and holding off on taking advantage of cutting-edge technologies and economies of scale.
Supply chain resilience in business
In recent years, supply chain resilience has moved up the corporate agenda to the highest levels, previously the domain of the purchasing and COO departments. Risky supply chains have been made visible by a number of crises, including the influenza, a shortage of semiconductors, and the conflict in Ukraine. Although price and quality are still crucial factors, supply chain directors are spending more to increase resilience and flexibility.
While the definition of supply chain resilience varies by industry, it generally refers to the capacity to proactively reduce risk, withstand unavoidable shocks, and bounce back swiftly from setbacks to minimize the impact on operations. Businesses can identify the most significant risks to their operations and evaluate the possibility of each by adopting a comprehensive perspective of the whole chain. Businesses can identify ways to stand out from the competition while reducing their environmental effect by comparing their strengths to those of their rivals.
Physical resilience in business
Physical resilience is increasingly important as companies face the growing impacts of climate change on their operations. In 2022, for instance, Apple and Intel endured a weeklong shutdown of production facilities in Sichuan, China, due to a drought that crippled hydropower plants. Despite these challenges, many businesses still underestimate their exposure to physical climate risks, often relying too heavily on limited risk-transfer tools like insurance instead of broader strategic and operational measures.
Southern California Edison (SCE) offers a proactive example. For over a decade, SCE has been managing climate risks to its power grid and generation assets, addressing threats like wildfires and droughts. Through detailed climate risk assessments, SCE reprioritized capital investments, spending around $5 billion annually to enhance grid resilience, reducing wildfire risk by 70% by 2021.
Building resilience in business requires a systemic approach across the value chain, using analytical tools to assess risks and taking practical steps to protect assets, restructure supply chains, or advocate for policy changes.
