Integrating strategy, risk and resilience

Integrating strategy, risk and resilience has huge benefits for organisations in today’s VUCA world.

Today’s world, more than ever, is volatile, uncertain, complex and ambiguous—VUCA for short.In such a world, the accelerating rate of change results in an environment in which only agile organisations will survive. But creating the required degree of agility can only occur if the three critical elements of strategy, risk and resilience are integrated in order to create a tight feedback loop to enable the organisation not only to identify and respond to large disruptions, but also to under take the continual recalibrations needed to adjust to incremental change.

Only then will the organisation be able to create and preserve value over the long term.

Whilst this makes perfect sense in theory, the truth is that in many (if not most)organisations, these elements continue to be managed in silos. And yet the benefits of adopting an integrated approach are game changing, with the primary one being that the organisation’s strategy is constantly being fine-tuned in relation to a risk landscape that is extremely changeable.

In effect, each of these adjustments also has the benefit of building the organisation’s resilience. Resilience is absolutely critical because nobody can foresee, or plan for, all risks. Our recent experience of the COVID-19 pandemic is a prime example: while we all envisaged the possibility of a pandemic, few people could have imagined that the measures taken to combat it would be so fundamentally disruptive—just how disruptive we are only now finding out.

Organisations need to be able to respond to the unexpected and continue to serve their clients and other stakeholders whatever happens: this agility is the core of resilience, and it’s critical.

Integrating these three components also leads to better governance. All of the Principles of King IV (Report on Corporate Governance for South Africa 2016) involve risk management in one way or another. In particular, King IV breaks new ground by introducing the vital truth that risk is actually the flip side of opportunity. This is especially clear in two of its principles. Principle 4 reads, The governing body should appreciate that the organisation’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process; while Principle 11 states, The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives.

Strategy, risk and opportunity are all intertwined, and “sustainable development” speaks to the resilience required to survive, no matter what happens.

Many organisations still do not understand the value in adopting the kind of integrated approach I have described, and even more have little idea of how togo about it. But help is at hand: the Institute of Risk Management South Africa(IRMSA) has developed a new guideline to assist both businesses and government entities understand the importance of integrating strategy, risk and resilience, and also how to go about it. The guide effectively acts as a manual, offering practical solutions to becoming future fit.