Episode Transcript
Speaker 0 00:00:00 Hello and welcome to the Managing Uncertainty Podcast. This is Brian Strauser, principal and chief executive here at Bry Path. And in episode 183, I want to talk about why resilience needs to be at the top of your board's agenda and why you're probably not in the room yet for these conversations. Your board, from a resilience standpoint, has to be thinking about protecting against the downside of potential disruptions, potential shocks coming to your organization, and then helping management understand how to capture the upside of that shock. Because as we saw very clearly during the pandemic at the height of covid, companies that had a strong crisis management process, were able to make decisions quickly and get ahead of the curve, get ahead of other organizations to resources, to talent, to the decisions, to the decisions that needed to be made to move your organization forward in that pandemic to deal with the challenges of that pandemic.
Speaker 0 00:01:04 And here's why. Resilience is on the board agenda right now. And it's not just because of what we've been through the last three years with the pandemic, but it's because we are truly facing an amazing set of disruptions right now. An amazing set of disruptions we're faced with the highest inflation we've seen since the 1970s, and not just in utilities and in food, but core inflation itself is high, and government and national banks like the Federal Reserve and other economic entities aren't sure what to do. We see slow downs in the economy that have been up and down, and we're not sure where that's going. Um, there's been volatility in the capital markets, access to credit and capital is tightening, and these are big challenges for growth-oriented companies like what most of us, uh, are likely in. And then we have the supply chain challenge with the supply chain challenges where we can't get things at the pace that we used to be able to obtain them.
Speaker 0 00:02:04 And we're seeing increases in negative sentiment from consumers and small, medium, and large businesses. We're seeing job growth, but partnered with a tight labor market and decreased productivity. So these are some macroeconomic elements that you may not realize are impacting what your board is thinking about from a resiliency standpoint. But uncertainty, uncertainty itself is the number one topic that board members are talking about. Now. There are some great things that are happening. It's not all doom and gloom. There's a lot of cash sitting in organizations, which gives them stability and safety and the ability to write out short term, um, shocks to the market. We see strong balance sheets. We're seeing a lot of innovation, particularly in technology and in reinventing services. We're seeing companies coming out of the pandemic thinking about and having taken advantage
Speaker 1 00:02:59 Of digital about improving productivity in their organization about driving innovation and growth. So we see these mixed signals on the economy, but we believe that these moments of high uncertainty are when institutions have to make big change. They have to be able to differentiate themselves in downturns. In the past, uh, that we've seen, and I'm thinking here in the, the late, uh, s so to speak, 2008, 2009, when we last saw a really strong, uh, recession, uh, hit the United States in the global economy, um, companies that differentiated themselves came out looking better over a seven to 10 year period. So the actions that your leaders take today, the actions your board can enable your management to take today really matters. So how does all of this play into resiliency? Well, we wanna make sure that the board is well prepared to address a whole new series of negative events just in the same way as they rose to the COVID 19 challenge.
Speaker 1 00:03:58 McKinzie. Every year the consulting firm does a global board director survey, and here's what they're telling, uh, McKinsey in the survey that they feel well prepared to deal with challenges to the core business, um, that they feel they're well structured to address issues close to home in that business like employee safety. They've learned this during the pandemic, but board members feel unprepared for larger scale forces. And this is where we come in as resilience professionals. This is where we could fo we can focus in order to have that credibility in the boardroom. One area in which they don't feel prepared are major crises. They also don't feel prepared about macroeconomic shocks and they don't feel prepared about climate change. They tell McKenzie that they don't feel, um, prepared around these things because they find the challenges ambiguous. But boards have also learned over the last few years their ability to move quickly and to make a decisions quickly have to increase to match the environments.
Speaker 1 00:05:04 So we're seeing boards meet more frequently. We're seeing boards do more ad hoc and virtual meetings on a more regular basis. Ad hoc phone meetings and virtual meetings in between regularly scheduled monthly or quarterly board meetings. In a lot of Fortune 500 companies, the board would only meet every quarter. We're now seeing every other month or every month with some interim calls in between being the common effort rather than being an outlier. We're seeing more frequent board meetings as we're going along. So there are ways that we can help as resiliency professionals to help our boards understand. The challenge First is that we need to make sure we have strong alignment between enterprise risk and the other elements of a resilient strategy, business continuity, crisis management, information security, physical security, travel safety and security, and other teams that are
Speaker 2 00:05:57 Touching the ability of your organization To withstand these shocks, we need to be aligned. We also need to be thinking about how can we use exercises or war games or simulations around potential crises to get the board and your senior executives used to making these decisions. For example, a few weeks ago we ran here at Breit Path, a complex ransomware incident, uh, over two days, um, about six hours over two days with, uh, one of our clients, a fortune, a privately held Fortune 500 sized organization that had never practiced this at scale before. And although the team did well, there were challenges and a lot of the challenges had to do with how things were escalated and how things were communicated, what the relationship and communication to their board and to their private equity owners needed to like. These are normal challenges the first time that you do this, but you practice to warn it in a safe environment, you practice to build the muscle memory.
Speaker 2 00:07:00 So this kind of war gaming on potential crisis situations is just one way to practice to be able to get the board used to having to exercise that muscle. It brings these situations to life and it gives you some muscle memory. The other great challenge here, and the one I will leave you with is that the future of resiliency is not going to look like the past of resiliency. There's a lot of us out there that have been in this space for a long time. I've been doing this for more than 25 years. Um, and in a lot of ways business continuity planning today looks a lot like it did 20 or 25 years ago. Um, maybe now we have tools, um, business continuity, specific software where we can enter plans and bids and do calculations and report on the data. Those are all wonderful things to have.
Speaker 2 00:07:51 But the, the real place we need to be is where our boards and our owners and our organizations need us. And that is to understand the broader challenge of resilience. What are these broader macroeconomic challenges that our companies are going to be faced with? What are these uncertainties from a geopolitical risk perspective that will have impact on our organization? And how can we work to have a stronger voice in the boardroom and better prepare and mature our organization in the future? That's it for this edition of The Managing Uncertainty Podcast. I'll be back next week with another new episode. Be well.
