Resilience Reimagined: A Practical Guide for Organisations

Define impact thresholds

Balance strategic choices

Discuss future failure

Consider connected impacts

Understand essential outcomes

Stress test thresholds

Enable adaptive leadership

A common mistake is to assume that specific issues in one of the capitals will have a corresponding impact. E.g. a problem with built capital (flooded building) will have only a related operational impact. This overlooks the other system impacts that must be considered. Impacts will vary depending on the situation, for example, a cyber attack’s human impact may be limited to inconvenience to customers and employee stress in one context. Yet, in another situation, such as a hospital, the human impact could be severe. There are some recent examples where critical infrastructure providers have been attacked by ransomware, and their critical control systems have been accessed and in an extreme situation, this could cause an environmental impact. The Deepwater Horizon incident involved the failure of built capital (a well blowout that caused the explosion), which was caused by a combination of human (error), social (relationships between BP, the company that leased the rig and owned the licence to drill, Transocean Ltd, the drilling rig owner, and cement contractor Halliburton Energy Service) and operational factors such as a flawed well plan that did not include enough cement. The corresponding impact was felt across all five capitals: human (11 people lost their lives, multiple injuries), environmental (described as the worst ecological disaster in the United States), reputational damage, and financial impact (estimated to exceed $60bn).

Reputational impacts can be unpredictable. Our previous work 11 reveals that ‘some events, it appears, can be converted into crises or disasters as long as there is political will or journalistic desire to do so. The press and 24-hour television news channels appear ever ready to declare a crisis in the interests of a dramatic story’. Incident investigations and public inquiries often point to systemic failures rather than individual human errors, highlighting organisational and governments, regulators, and management teams involved in such events are scrutinised in courts of public, media, and political opinion. Such incidents can provoke uncertainty, pessimism, and a general loss of trust in organisations and Government. management factors as the leading causes of crises 11 . The preparedness and responses of the

NO ORGANISATION IS RESILIENT UNLESS THE SYSTEM IS RESILIENT. The five capitals model 8,9,10 can be used to allow organisations to examine five connected impacts (Table 1) for every severe but plausible scenario. The model can also help organisations examine their connected resilience and consider what needs to be done to maximise the value of five capitals, manage ‘trade-offs’, and avoid weakening them. In many organisations, these impacts are labelled people, reputational/regulatory, operational, environment and financial.

Table 1. Five capitals and corresponding impacts

Five capitals

Key impacts

Human capital (e.g. skills, capabilities, experience, know-how, tacit knowledge) Social capital (e.g. networks, norms, values and understandings that facilitate cooperation, collaboration and community) Built capital (e.g. buildings, water processing, manufacturing and processing plants, energy, transportation, communications infrastructure, technology) Natural capital (e.g. materials, soil, air, water, plants and animals) Financial capital (e.g. cash, assets, credit, and other forms of funding that build wealth)

People impact (e.g. harm, wellbeing, health, absenteeism, turnover) Reputational/regulatory impact (e.g. reputation, confidence, trust, complaints, customer loyalty, regulatory fines, contractual penalties, market integrity) Operational impact (e.g. machine downtime, system outages, capacity utilisation, on-time delivery, yield, data loss) Environmental impact (e.g. biodiversity loss, pollution, deforestation) Financial impact (e.g. profitability, liquidity, cash flow, solvency, valuation)

14 Resilience Reimagined: A practical guide for organisations