Strategic Planning for Operational Resilience: Where to Start?

Bradley Chapman

Strategic Planning for Operational Resilience: Where to Start?

Operational incidents cost organizations an average of $4.24 million USD per data breach in 2021.

Operational resilience is no longer a nice-to-have, but a necessity in today’s rapidly changing business landscape. As organizations face increasing risks and regulatory scrutiny, strategic planning for operational resilience has become a crucial priority.

This article explores the importance of operational resilience, its impact on organizations, and how to start building a robust operational resilience framework. Whether you are a small startup or a large enterprise, the principles of operational resilience are applicable to all.

The Importance of Operational Resilience

Operational resilience helps organizations identify and mitigate risks, minimize the financial impact of operational incidents, and prevent disruptions. Operational incidents can have a significant financial impact and disrupt entire markets and systems. The global average cost of a data breach in 2021 was $4.24 million USD, and operational risk incidents at financial institutions can result in significant declines in total returns to shareholders.

Regulators now focus on how effectively organizations can recover from disruptions in addition to preventing them. Regulatory authorities expect organizations to understand their vulnerabilities, invest in protecting themselves and their consumers, and retain continuity of supply of products even in the face of operational disruptions.

Organizations need to prioritize risk and control identification and establish robust mechanisms for managing and minimizing risks. By proactively identifying and addressing potential operational vulnerabilities, organizations can enhance their ability to withstand disruptions and maintain business continuity.

Building an Operational Resilience Framework

Building an operational resilience framework starts with defining key business services or critical economic functions (CEFs) that, if disrupted, could cause substantial harm. This involves mapping the organizational hierarchy, aligning business objectives with risk appetite, and identifying the users of each service.

Setting impact tolerances and risk metrics determines the acceptable level of disruption and measures the potential impact of disruptions on the organization. This involves quantifying the level of disruption that can be tolerated without causing significant harm.

Understanding dependencies, both upstream and downstream, and mapping the people, processes, systems, and third parties required for delivering the business services is crucial. Identifying these dependencies helps in assessing the potential risks and vulnerabilities that can affect the delivery of key services.

Organizations should leverage scenarios for potential points of failure by considering past failures, examining different risk factors, and identifying action plans to mitigate risks. This proactive approach enables organizations to identify vulnerabilities and develop strategies to prevent or respond to disruptions effectively.

Actions to Build Operational Resilience

Building operational resilience requires organizations to take proactive actions to enhance their existing processes and systems. Organizations can leverage effective risk management practices to strengthen their operational resilience by analyzing and improving existing processes. By doing so, organizations can identify vulnerabilities and implement necessary controls to mitigate potential risks and disruptions.

It is crucial for organizations to know their third parties and understand how they contribute to the overall resilience of the business. Third parties, such as suppliers, vendors, and service providers, often play a critical role in delivering key business services. Therefore, organizations should incorporate them into their resilience planning and ensure they have robust business continuity plans in place.

Stakeholder communication plans are another essential aspect of building operational resilience. Organizations should develop comprehensive strategies to communicate with internal and external stakeholders during critical incidents or disruptions. This includes establishing clear lines of communication, defining roles and responsibilities, and providing regular updates to keep stakeholders informed and maintain trust and confidence.

Actionable reporting is crucial for effective operational resilience. Organizations need to implement a reporting framework that enables the identification, tracking, and monitoring of key resilience metrics, as well as the timely escalation of issues. This allows for proactive decision-making and the implementation of necessary actions to ensure operational continuity and minimize the impact of disruptions on the business and its stakeholders.

Bradley Chapman