The COVID-19 pandemic has thrown into sharp relief the ability of businesses to respond to a crisis. Much has been written about the demise of Debenhams and Arcadia, but this should not have been a surprise. What both of these companies lacked was resilience. By contrast, Next, another large retailer with a huge fixed-cost base appealing to a similar market, continued to do well. It is a company with resilience in abundance.

What is resilience? According to TechTarget, “Business resilience goes a step beyond disaster recovery by offering post-disaster strategies to avoid costly downtime, shore up vulnerabilities and maintain operations in the face of additional unexpected breaches. An often-overlooked challenge of business resilience planning is the human element… individuals in a chaotic situation must be prepared and educated on how to respond accordingly.”

That Next has a strong balance sheet and established online presence has been much discussed. What has perhaps now been forgotten is that when its CEO, Lord Simon Wolfson, announced the group’s results on 19 March, just before the first lockdown, he specifically addressed the group’s resilience and his confidence that it would survive, however long the pandemic lasted.

The stores, of course, were closed and so was the online supply chain at the beginning, but this quickly reopened once safety measures had been put in place. The business was built on firm foundations with a competent and empowered management at every level. It also had a strong board run by an outstanding leader who thought about things that could go wrong. The company did not just survive, it thrived.

Pressure from regulators has meant financial services businesses have been thinking increasingly about their operational resilience in recent years, although even the best recognise they have a way to go. Outside of financial services, resilience is not talked about much, despite the recent experience of the financial crash and current pandemic.

Yet some organisations had identified a pandemic as a major risk, including the NHS (which had run a simulation of the results, although it is not clear that it completed the feedback loop and fully prepared for it) and HSBC. In recent years, there has been a pattern of unexpected events that should have alerted companies to expect the unexpected.

In March 2020, many businesses were either prepared for a pandemic or able to respond effectively to minimise disruption. Others, probably the majority, were not prepared. This lack of forethought is something companies would be wise to address urgently.

There are several key points to bear in mind when making a business resilient for the next crisis.

• It is not the same as contingency planning or disaster recovery – these are the things you implement when an organisation has failed to have a resilience plan and has to recover after the crisis has struck.
• Designing resilience into the management of a business runs from top to bottom, so it is a key part of strategic management and the responsibility of senior management.
• The business must have a written resilience plan. However, as General Dwight D Eisenhower said, it is not the plan that is important, it is the planning that generates the plan.
• It is imperative that staff are familiar with the plan, since a crisis affects everyone. Airline pilots spend a lot of time training because frequent simulations prepare the crew to be effective in an emergency. On the flight deck, teamwork is a critical part of the survival plan – as it is in almost every organisation.
• The resilience plan should be the result of a structured review to identify the strengths and weaknesses of the business and its operating environment. Larger organisations will have the in-house resources to undertake such a review and create the resilience plan. Consultants are available to support those without such resources – they come in all sizes and smaller companies will be able to find one to match their finances.
• Investment may be necessary. The pandemic forced some manufacturers to move from ‘just-in-time’ to ‘just-in-case’ models. It may be necessary to duplicate some facilities or stock some key items off site.

Remember, if you fail to plan, you will most surely plan to fail.

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The ICAEW Library & Information Service provides full text access to leading business, finance and management journals and a selection of key business and reference eBooks. Further reading on business resilience is available through the articles and eBook below.