What is Business Resilience & Why is it Important in Business?

There is much talk currently about business resilience but what is it, why is it important and how do you ensure your business is?

In this article, I will try to answer these questions and also give some examples of what you should be thinking about to improve the stability and robustness of your company. Firstly, let’s look at what business resilience is.

What is business resilience?

Business resilience is ‘the ability of a business to survive unforeseen events that may otherwise have caused the failure of a business’.

Why is business resilience so important now?

There is an irony that in a period when so much has been talked about the importance of ‘Globalisation’ we are now seeing a litany of global issues dominating our economic position; Covid, escalating energy costs, war in Europe, global food price rises, recession and inflation.

In addition, we have the after effects of the B word, even though our politicians seem unable to be straight and admit that Brexit has damaged the economy. There can’t be many people who can remember a time when there have been so many potentially damaging events facing businesses. It is this tidal wave of events that means business must be prepared to adapt, change, be flexible at short notice to ride out each storm as it hits.

If we cast our minds back to the height of the Covid pandemic, businesses had to learn very quickly how to become more resilient to ensure survival through the crisis.

So, as we move further into the 21^st century how do businesses continue to develop their resilience to both internal and external factors in these uncertain times?

How do I make my business resilient?

My own recommendation is that you adopt the ‘what happens if [insert scenario] happens’ thought process; that is looking at key areas of your operation and asking ‘what if’ this or that happened, what is our contingency, what is our plan B?

This is typically more realistic than some more traditional ways of planning such as forecasting your profit and loss for the next twelve months where you might look at preparing several forecasts based on sales growing at X % or maybe falling by Y%. In the world we now find ourselves in we need to be more creative, dare I say it more pessimistic! So, using the forecasting P&L example above we might ask ourselves some of the following questions:

• What would happen to our sales in the event of a second pandemic lockdown of say three months?
• How would we maintain a flow of goods if tensions between China and the west created supply chain problems? (which I here and now assure you will happen sometime in the future)
• What contingencies do we have in place across our whole supply chain?
• As we head into a recession how do we expect that to impact on our target market group of customers, will they feel the pain immediately/longer term and curb spending on our products?

This last one is currently the most pressing issue to consider, consider just how will a recession accompanied by high inflation, higher interest rates and a reduction in living standards for many, affect your customers and their likelihood to buy your products. The answer of course depends on what you sell, how you sell it.

During Covid our mentor for businesses near Manchester, Paul Clarke, shared his top tips for making businesses more resilient during the pandemic, so it’s an article worth reading.

Understanding the different types of business resilience

To be truly resilient, an organisation needs to have a business continuity plan/disaster recovery plan that lays out what the staff/business will do in the event of unforeseen circumstances. This can cover anything from a power or IT failure, through flooding of premises to dare I say a global pandemic.

So, what areas would a plan cover to ensure that the business covers all key aspects required? Here are my recommended four key areas that owners of small businesses should give thought to and a few examples of the points to consider:

Organisational Resilience – your people

• Who are the key senior people in your business without whom the business would struggle to survive?
• How do you make the business less reliant on them?
• Can you train deputies or Assistants who would be able to provide cover?
• Across the rest of your workforce what does the skills spread look like, is there good back up cover for roles – a good idea here is a simple flexibility chart to show all the key roles needed and who can do them. Where there are obvious gaps or shortfalls, put a training / shadowing programme in place.
• Ask yourself where are your next recruits coming from, do you need to be thinking of apprentices or office juniors to start ‘growing your own’ talent?
• On the recruitment side how robust is your recruitment procedure, are references always obtained and do you select well or is external training or help needed?

Financial Resilience – the profit and cash

• How will events such as described in paragraph one above affect your sales line, if you sold nothing for 2/3 months clearly it would affect your profit and loss for the period but how would it affect the business’s capital base, its retained profits, is there sufficient ‘fat’ on the balance sheet?
• Similarly, from a cash perspective, if sales fell off a cliff for 2/3 months therefore cash stopped flowing in, what would the effect on your bank balance be – how long could you survive for?
• Does the business have the necessary insurance policies in place to cover things such as business interruption and the obvious ones of fire and theft. Additionally, you may consider debtors insurance – could you survive if one of your major clients went out of business owing you a couple of months invoices?

Operational Resilience – the logistics

• If an event stops you receiving goods due to say post/train strikes or maybe a ship stuck in the Suez Canal (who saw that one coming ?!) what would be the impact on your business and what would your contingency plan be?
• Similarly, if an event prevents you delivering your product or service to your customers, what could you do? Who/what would be an alternative delivery option for you and what extra cost would be involved?
• If your customer orders normally come in by phone what would you do if your telephone system failed, how quickly could you contact your customers to give them an alternative and what would that be?

Technical Resilience - the IT

• The obvious one here is what happens if any of the software systems you use fails – who provides your support to get it back asap and what backup do you do for all your data?
• Cyber attacks – are becoming far more frequent. How secure is your website and other digital assets, consider getting it reviewed by a cyber expert to ensure it is as safe as possible.
• Passwords and emails - how secure are your internal procedures to ensure passwords are as strong as possible, changed regularly and not available to third parties?
• How secure are your PCs/laptops and mobile phones, if any were stolen how easily could an expert thief break into them and access your secure data or even your bank?

Reputational Resilience - brand perception

• Negative reviews or negative press - What happens if a product you offer results in a serious piece of negative brand awareness? We’ve all heard about cases such as babies who somehow become trapped in the bars of cots, or cars which have developed safety faults. This is why so many companies have formal recall policies in order to minimise risks before they happen, and to show they’re taking immediate action and taking any issues which they become aware of seriously

All of the above ‘what ifs’ are a good example of the kind of questions a Business Mentor would ask, open questions that make you think about your business from a slightly different perspective.

It’s important for owners of small businesses to realise that the type of planning discussed here is no longer just for large businesses or corporates. If events over recent years like Brexit, Covid and war have taught us anything, it is that we need to expect the unexpected. Two years of Covid with lockdowns and restrictions proved that the businesses which survived were more flexible, adaptable and in some instances more creative and therefore more resilient.

What should a business resilience plan include?

This can be quite an in-depth topic so for a more detailed explanation of how to put together your plan the following two articles are well worth reading:

• Business Continuity Planning - What is it and How do you create a BCP?
• What is a Disaster Recovery Policy & How do you create one?

Need help to check or improve your business resilience?

If you would like some help and support making your business more resilient or indeed with any aspect of your business then we offer a complimentary, free mentoring session.

Typically, this is around an hour and a half spent with one of our experienced business mentors covering any aspect of business. There is no obligation to use our services afterwards, but it will allow you to experience how having a mentor can help you and your business.

Joe Hinton
Managing Director and Founder
UK Business Mentoring Group

0845 680 3634
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