RESILIENCE IN ‘VUCA’ TIMES
The need to develop skills to thrive – Kiran Dhanapala
Resilience is the ability to thrive under change. The highly VUCA (volatility, uncertainty, complexity and ambiguity) times we live in demand different skills to thrive. Environmental, social and governance (ESG) considerations all demand urgent reskilling for corporates and SMEs to function, let alone thrive.
We see this in Sri Lanka with protests around the erosion of governance especially in strong, independent institutions that are fundamental for thriving.
The Climate Change: Impacts, Adaptation and Vulnerability report of February 2022 by the IPCC is the largest and most comprehensive evidence-based research to date – and we are among the 3.3-3.6 billion people living in countries that are highly vulnerable to climate impacts.
Further, other challenges – especially inequity, conflict, poverty, weak governance and limited access to basic services, such as electricity and healthcare – heighten our sensitivity to hazards and constrain communities’ ability to adapt to climatic change.
We need to understand and invest in making ourselves more resilient for what is to come. This means recognising that adapting to climate change is critical and must be acted upon – now.
The Intergovernmental Panel on Climate Change has outlined three approaches that need to be followed.
These include social programmes that improve equity and justice such as social safety nets; improved infrastructure access; partnerships between government, civil society and private sector; ecosystem-based adaptation like crop diversity and trees in pastures; and new technologies and infrastructure that include resilient crop varieties, renewable energy etc.
In Asia, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) finds that since COVID-19 posed health and economic risks, which affected livelihoods, recovery must focus on inequality.
While the informal sector and SMEs were hardest hit, big business was too – and it makes sense for these two categories to collaborate. A green recovery is vital with climate change and decarbonisation as the new pillars of economic policy and an emphasis on nature-based solutions.
Asia is diverse; so stakeholders must build collaborative links for specific geographies and cultures in the region, and focus on who is impacted at the very bottom of supply chains.
Corporate resilience goes beyond a short-term perspective that focusses on operational continuity and is now acknowledged as a source of strategic advantage.
There are several aspects of resilience as captured in a 2021 McKinsey corporate survey. These include financial; operational; digital and technological; organisational; market position and innovation; reputation, brand and customer purpose; ESG factors; foresight; and finally, disruption and crisis response.
Most of those surveyed found financial, operational and technological resilience to be the most important across sectors. Several risk managers who were surveyed wanted to improve the related culture in their corporate entities and strongly integrate resilience with strategy.
Many look inward, and not to regulators and other external stakeholders, to strengthen resilience. This differs for the highly regulated financial sector. Respondents thought purpose and ESG were relatively more important to consumers. Basic materials, chemicals, agriculture and power, as well as oil and gas, were also considered valuable for the healthcare sector.
Corporate boards are addressing risks too. McKinsey finds those boards that are quickest to adapt to the COVID-19 pandemic focus on specific external risks, organisational issues and corporate purpose rather than resilience in general. They look more at many risks – including political, geopolitical, macroeconomic and climate-related risks.
These are strategic and risk-related issues, which are deemed instrumental for corporate success and discussion at least once a year by all boards.