How to improve business resilience
26 Feb 2018
Across the island of Ireland, improving business resilience has never been more important, says Feargal McCormack.
The concept of business resilience is attracting a lot of attention at the moment. One of the best definitions is by BSI, the UK national standards body. It describes resilience is ‘the ability of an organisation to anticipate, prepare for, respond and adapt to incremental change and sudden disruptions in order to survive and prosper’. As businesses across the island of Ireland, prepare for Brexit, this ability has never been more important.
Four ways to increase business resilience
1. Leadership and strategy
Your vision and business plan are crucial. Everyone in the organisation needs to understand your core vision and everyone is accountable for delivering this strategy. Now is a good time to check that the goals you set for yourself and your employees support this. Individual goals should be monitored on a continuous basis to keep everyone on track.
Remember that your strategic planning should include succession planning. PKF-FPM sometimes sees clients failing to take account of the tax consequences of succession planning decisions in family businesses. As well as securing the continuity of the business, a key objective should be to safeguard your personal financial independence and security. So, before you finalise succession and asset transfer objectives, it’s important to consider tax planning.
2. Operational resilience
Your organisation’s operational resilience is the ability of your people, processes and systems to react effectively to disruption or change. Controlling your costs and optimising operations in line with your strategic priorities is very important. The better you understand how to manage these aspects of your business, the more resilient you will be. Keep areas such as tax, supply chain, regulatory and legal issues should under constant review and remember to look for opportunities as well as solutions to problems. PKF-FPM is working with a number of clients who are exploring strategic alliances to mitigate their potential supply chain and market Brexit-related risks.
Contracts should be reviewed, particularly long-term contracts, to ensure that they will continue to be fit for purpose post-Brexit.
Location, logistics and financing should be other top priorities. You can strengthen your operational resilience by identifying the potential crises that could affect your business, grading these risks according to the impact they would have and then implementing a plan to manage the risks. I discussed this in more detail recently in a blog titled, Understanding Business Continuity Planning.
3. Financial strength
Improving the financial strength of your business is a very effective way to build resilience. Return on investment, cash flow, return on capital employed and financial results are the areas to focus on here. Good financial discipline is essential. In previous blogs, I covered some of the ways to achieve this such as monitoring suppliers and implementing real time accounting. Resilient businesses have the ability to rapidly analyse and assess financial information and performance indicators. Implementing appropriate systems will help you to achieve this.
Your employees also need to be resilient in order to cope with change. Good communication plays an important role in this regard and managers who communicate change effectively will minimise employee distress. Skills levels, employee turnover, job satisfaction, training and learning opportunities should be carefully monitored. Investing in workplace health and wellbeing can also contribute to improved resilience.
In this blog, I have highlighted four key themes that will assist you to build a more robust business — strategic planning, operational effectiveness, financial strength and investing in people. Remember, however, that more than any other factor, the quality of your organisation’s leadership is what ultimately determines success or failure.