Research finds that resilient firms are those that eliminate internal barriers

Published on Sat, 06/07/2013 - 23:00

Research finds that resilient firms are those that eliminate internal barriers. Resilient companies do not depend solely on processes or compliance; they create an environment where everyone is risk-aware and barriers between senior managers and their staff are reduced to a minimum. That is one of the main findings of ‘Roads to Resilience’, a report being produced by Cranfield Business School on behalf of Airmic.

Researchers investigated eight firms that have either managed to ride crises successfully or have avoided them altogether. Just as Darwin discovered that the most adaptable, not necessarily the strongest species survive, ‘Roads to Resilience’ found that the most durable firms are those that can respond rapidly and effectively to changing circumstances.

In order to do so, businesses should create a culture where all staff are risk-aware and feel able to pass on their knowledge and views (even bad news!) to senior management. The role of the formal risk function is to guide and educate colleagues rather than to create a silo labelled ‘risk management’.

‘Roads to Resilience’ follows the highly acclaimed ‘Roads to Ruin’, which investigated the factors behind corporate failure. Published in 2011, the first research identified ‘risk glass ceilings’ as a recurrent problem, where vital information known elsewhere in the organisation never reached senior management or the board.

By contrast, ‘Roads to Resilience’ finds that the glass ceiling is absent in successful companies, and staff communicate easily with those at the top, acting as their radar. To achieve this, senior managers need to engage with their staff, earning respect by listening and experiencing what it is like to work in the company.

“At Jaguar Land Rover, senior executives spent half their time walking the shop floor, instead of sat in front of their computers in ivory tower offices. There has to be strong trust and people have to respect and be respectful of the people leading them,” said Dr Stephen Carver of Cranfield Business School.

To quote the chief operating officer of Virgin Atlantic: “The executives sit in open-plan offices, and we are not on the top floor – we just happen to be in one corner on the second floor. People know where we are, we immerse ourselves in the business, and they can come and talk to us.”

“The key message in this report is that culture enables resilience, and that culture comes from the top,” said Airmic chief executive John Hurrell. “Board members need to lead the way, not by lecturing their people but through example and connecting with them, by being approachable and willing to listen.

“It also represents a great opportunity for risk managers who, by virtue of their job, often have a broader knowledge of their companies than anyone else. They are ideally placed to facilitate the development of a corporate culture where everyone owns the risk management process.”

Airmic has published the main findings in an executive briefing ahead of the full report, which is due to come out in September. It is based mainly on interviews with executives at eight companies: American International Group(AIG); Drax Power Station; InterContinental Hotels Group; Jaguar Land Rover; Olympic Delivery Authority; The Technology Partnership; Virgin Atlantic, and Zurich.

The project is sponsored by Lockton, Crawford and PwC.

Roads To Resillience