Navigating the Difference: Operational Risk vs. Operational Resilience

Have you ever considered the potential threats lurking within your everyday business processes?

Operational Risk encompasses a wide array of risks, from internal factors like human error and IT failures to external dangers such as natural disasters and cyberattacks. How well do you think your organization is equipped to identify, assess, and mitigate these risks to safeguard against disruptions and financial losses?

Operational Resilience:

Shifting our focus to operational resilience, it is the backbone of an organization’s ability to adapt, endure, and recover from operational disruptions. It’s the result of effective operational risk management.

But how do you know if your organization is resilient enough in adversity?

Operational Resilience aims to ensure critical business functions continue functioning and emerge as a result of effective operational risk management practices, aiming to ensure that critical business functions continue seamlessly during disruptions, minimizing the impact on customers, reputation, and financial performance.

A simple food for thought — Can your organization weather the storm of operational challenges?

It can! If these practices are implemented, any business can weather this storm.

Moving forward, we can focus on the “hows” of implementing these practices that will help businesses in the long run.

How do we build Operational Resilience?

Introducing a system that reinforces your business, with the following set of protocols.

Here’s how companies can build operational resilience:

1. Identify Critical Business Functions (CBFs): Pinpoint the core processes essential for ongoing operations and customer service.
2. Risk Assessment for CBFs: Analyze potential threats to each CBF, considering likelihood and impact.
3. Develop Business Continuity Plans (BCPs): Create detailed plans outlining how to maintain CBFs during disruptions, including alternative workflows, backup systems, and recovery procedures.
4. Invest in Technology & Infrastructure: Implement robust IT systems, data backups, and redundancy measures to ensure continued operation during outages.
5. Employee Training & Awareness: Train employees on identifying and responding to disruptions, including following BCPs. Foster a culture of preparedness.
6. Incident Response & Recovery: Establish clear protocols for handling disruptions, minimizing downtime, and facilitating recovery.
7. Regular Testing & Improvement: Conduct regular testing of BCPs and resilience measures to identify weaknesses and continually improve your response capabilities.

Measuring Operational Resilience: Gauging Your Preparedness

To gauge your operational resilience, it’s essential to measure key metrics that reflect your organization’s ability to adapt and recover. There needs to be a single metric to quantify this. So here’s a multi-faceted approach,

Mean Time to Recovery (MTTR): Measures average time to restore critical functions after a disruption. Lower MTTR indicates better resilience.

Loss of Revenue/Productivity: Tracks financial impact due to disruptions. Lower losses suggest better resilience.

Customer Satisfaction: Measures customer impact during disruptions. Minimal disruption to customer service signifies resilience.

Resilience Testing Results: Periodic testing of BCPs reveals strengths and weaknesses in your resilience strategy.

Number of Disruptions Handled Effectively: Demonstrates your organization’s ability to adapt and recover from actual disruptions.

Effective Operational Resilience Testing: Putting Your Plans to the Test

To ensure the effectiveness of your operational resilience plans, it’s essential to conduct thorough testing. Here are some key testing strategies to implement,

Scenario-Based Testing: Simulate various disruptions (power outages, data breaches) to assess BCP effectiveness and employee response.

Tabletop Exercises: Facilitate discussions on potential disruptions, allowing teams to walk through BCPs and identify areas for improvement.

Lessons Learned Analysis: After testing, analyze results to identify weaknesses, update BCPs, and improve overall resilience.

Maintaining Operational Resilience During Change: Adapting on the Fly

During times of change, maintaining operational resilience is crucial. Here are some strategies to adapt and thrive.

Change Impact Assessments: Evaluate how planned changes (new technology, restructuring) might affect CBFs and resilience. Adapt BCPs accordingly.

Continuous Monitoring & Improvement: Regularly review internal and external threats, update risk assessments, and refine BCPs to reflect changing landscapes.

Communication & Collaboration: Foster open communication across departments and with stakeholders regarding disruptions and resilience efforts.

Embrace a Culture of Resilience: Integrate resilience principles into everyday operations and decision-making for a proactive approach.

By following these steps, organizations can build a strong foundation for operational resilience, ensuring they can navigate disruptions and emerge stronger.

Ensuring Long-Term Operational Resilience

In conclusion, operational resilience is not just about reacting to disruptions, it’s about proactively preparing your organization to withstand and recover from challenges.

By identifying critical business functions, developing robust plans, and continuously testing and improving your resilience measures, you can ensure your business remains strong and agile in the face of adversity. Operational resilience is not a one-time task but a continuous process of adaptation and improvement, ensuring your organization is always prepared for whatever the future may hold.

Join us on this journey to fortify your organization’s resilience and shape a future that thrives amidst challenges.