As business landscapes evolve and risks linked to third-party activities continue to rise, the ability of your organization to respond to and recover from disruptive events is critical. Organizations must look beyond transactional risk management tasks and focus on implementing an overall organizational resilience strategy.
“Organizational resilience is the ability of an organization to absorb and adapt in a changing environment to enable it to deliver its objectives and to survive and prosper. More resilient organizations can anticipate and respond to threats and opportunities, arising from sudden or gradual changes in their internal and external context. Enhancing resilience can be a strategic organizational goal, and is the outcome of good business practice and effectively managing risk.”
(ISO 22316:2017)
While organizations can’t plan for everything, they can adjust their approach to anticipating and managing threats facing their extended enterprise. Becoming more responsive and versatile can better prepare your organization for future uncertainties and build the path to resilience.
For example, the consumer-packaged goods company, Unilever, implemented structural changes in order to build their organizational resilience. By reducing management levels and reorganizing major product categories, Unilever achieved better flow of communication and faster feedback. This established them as a more fluid, externally-facing company, and allowed them to better prepare for and identify risks before they became disruptions.
Roles that are involved in organizational resilience include compliance officers, risk managers, Chief Risk Officers, Chief Information Security Officers (CISO), and third-party risk managers. Functions such as these collaborate with departments like procurement and IT to design and lead resilience programs that successfully navigate challenges.
The foundation to building resilience within your organization is your ability to anticipate and respond to evolving risks. These threats may vary from increased regulation and compliance demands, to cyber incidents or stricter ESG expectations.
For example, just earlier this year a ransomware attack occurred where the cloud management software, MOVEit, fell victim. The software was used as a third-party program for many organizations and the hack resulted in a global data breach that exposed sensitive information, impacting millions.
Another example is when Metropolitan Commercial Bank in New York was recently fined over $14 million by the Federal Reserve Board. Inefficient third-party risk management practices resulted in poor customer identification checking, which led to unlawful collection of unemployment benefits. This oversight led to violations of the Bank Secrecy Act and carried heavy repercussions.
Sustainability and ESG expectations also pose a risk when it comes to regulatory pressure and compliance across value chains. The European Union’s Corporate Sustainability Reporting Directive (CSRD) and the SEC’s climate risk disclosure rule are just two examples of the constantly evolving regulatory landscape.
Risks can come from any corner, and while it’s impossible to catch every possible scenario, organizational resilience can make it easier to identify such risks before they occur and respond faster and more efficiently if they do through training, efficient processes, and agile practices.
Organizational resilience involves a variety of risk management frameworks and extends beyond just a single set of tasks or functions. These frameworks can include:
A planned system for identifying and handling a variety organizational risks and sustaining normal business operations during major or disruptive events.
The processes an organization implements in order to respond to a critical event or disruption that could potentially harm the business, the public, stakeholders, or other entities.
The processes implemented to address and help an organization recover after a situation has occurred that negatively impacted operations, and help their operations get back on track quickly.
The strategic functions a business takes to identify, assess, and mitigate risks within its supply chain.
An element of a company’s risk management program that specifically focuses on identifying, monitoring, and mitigating risks associated with external parties such as suppliers, vendors, contractors, and other business partners that have a relationship with the organization.
The procedures and tools used to protect critical systems and information from digital attacks. This includes the cybersecurity of vendors and across the supply chain.
An organization’s IT systems and infrastructure that support operations and its ability to maintain service levels and operate effectively when a disruption occurs.
Organizational resilience training helps build new routines and improvisation techniques that allow employees and leaders to be prepared to, act comfortably and efficiently during unexpected situations. Exercises that assist companies in crisis response and preparation include Incident Response Training, Business Resilience Training, and Business Continuity Training.
These initiatives build upon business continuity to evaluate impact and tolerance levels during disruptive events that could impact your organization, customers, and other stakeholders.
Identify the scope & purpose of your org resilience program: To achieve organizational resilience, you must first define the purpose of your program and what it aims to achieve. Companies often limit their potential of building resilience by not clearly providing direction for their team and not aligning risks with strategies. Aravo’s Strategic Alignment Framework helps accomplish this by building a best-practice approach for your specific TPRM and resilience goals.
Identify your internal team, resources needed, & who does what: Determine who your internal team is (in terms of who is leading and will be involved in these initiatives) and align them around your overall risk management strategy. Be sure to recognize the resources necessary to accomplish these goals and identify the role each member plays in order to achieve them. Doing so will allow transparency among team members and allow for operational efficiency in times of uncertainty.
Promote a culture of agility, communication, and breaking down silos: Even when not in times of crisis, promoting a culture of flexibility and communication allows your organization to adapt to challenges as they come and remain agile in ever-changing environments. Clear, effective communication can improve responsiveness and collaboration among teams. In addition, breaking down previously isolated functions and technology and integrating these siloed processes allows for better connectivity across programs and greater resilience for your organization.
Embrace agility, reacting quickly, and shifting processes as needed: Rigid business models can stand as an obstacle in the face of a crisis, as they can limit your organization’s ability to react and adapt to any given situation. It’s important to embrace agility and remain flexible as different sets of risks will require different responses. This along with proper training will enable your team to use adaptive decision-making, react faster, and ultimately strengthen your organizational resilience.
Ensure your TPRM software grows with you/isn’t holding you back: TPRM software that is inefficient or doesn’t align with your organization’s strategy or objectives will only hold you back. Guarantee that your TPRM software is up-to-date and keeps pace with your company’s growth. At Aravo, our solutions are designed to align with your organizations size and maturity to deliver successful business outcomes and allow for proper growth as your program evolves.
To learn more about how to improve your company’s organizational resilience and build your TPRM program, speak with one of Aravo’s experts today!
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