Building organisational resilience

WHEN the Covid-19 outbreak led to safe distancing restrictions being implemented in Singapore, retail and F&B outlets faced a surge in contactless transactions. To navigate this changing dynamic, coffee chain Starbucks encouraged its customers to use its contactless Mobile Order & Pay system through the Starbucks Singapore app. It also put in place measures that prioritised customer and employee safety.

Starbucks also adapted its menu during this period, launching the Impossible™ Rendang Pie in July to meet rising demand for plant-based food options. These measures were part of the company's effort to deal with a fast-changing environment, and build a more resilient organisation in the face of an unprecedented crisis.

"We need to always stay prepared, agile and on standby to proactively plan for a suite of different scenarios, rather than responding or operating on a reactive basis. At Starbucks, we pride ourselves on consistent planning and innovation - which has been helpful in enhancing our resilience during this period," says Karen Cheng, finance director at Starbucks Singapore.

"This entails preparing the mental state of our team to be flexible and to creatively tackle challenges, as well as taking steps to preserve strong team morale and engagement. We also need to forecast upcoming opportunities and challenges and conserve funds, ensuring sufficient funding options and maximising cash efficiency."

As the Covid-19 situation continues to evolve, with countries and businesses emerging from lockdowns that have devastated economies and businesses, organisational resilience has become a key priority. "A company's objective must be to sustain and grow its business. To achieve this objective, it needs to be resilient to meet challenges and be able to adapt and recover from disruptions, whether it is from a pandemic, or other crises," says Chng Lay Chew, Singapore divisional president, CPA Australia.

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While good companies have always practised robust risk management, crises are impossible to predict and indeed, Covid-19 has impacted businesses on multiple fronts, jumpstarting the need for new ways of working as well as new business models in response to shifting customer behaviour, disruptions to supply chains and more stringent regulatory demands.

Unlike previous crises, the impact of the pandemic is also more widespread and has brought into focus a broad range of risks beyond financials. These include health and safety concerns, cyber and information security threats, the resilience of critical third parties and vendors, and manual regulatory compliance and control capabilities. "We can never be fully prepared for all eventualities, but we must lay the groundwork to be able to respond quickly and effectively. Companies have to stay informed," notes Mr Chng.

Among other priorities, organisations need to embrace changes such as digitalisation and evolving customer behaviour and preferences, develop early warning systems and reporting processes, and make it compulsory for all functions across an organisation to have risk management on their agenda and develop business contingency plans.

Explains Max Loh, managing partner (Singapore and Brunei), EY: "Many organisations realised they could have been overestimating their digital maturity, while underestimating the need for digital transformation as a means to achieving business agility and resilience. As organisations look to position themselves for a post-pandemic recovery, digitalisation will be a key theme. The key question is whether these digitalisation efforts are done in silos or as part of an overall business transformation strategy."

To help businesses navigate the pandemic, EY has developed an Enterprise Resilience Framework, which identifies nine areas that they must address to take a structured and comprehensive approach to business resilience. These nine areas are employee health and wellbeing; talent and workforce; supply chain and global trade; customer and brand; financial and investor; risk; government and public policy; technology and information security; and insurance and legal disputes.

Among these, the most pressing pertain to people: Employee health and wellbeing, and talent and workforce. Says Mr Loh: "A physical return to the workplace is a priority for many organisations. The imperative is ensuring a trusted transition back to workplaces with safety protocols and monitoring, and scenario planning to deal with contingencies."

RE-SHAPING RISK MANAGEMENT

Given the higher level of uncertainty at the moment, it is important for companies to prepare for a wider range of scenarios, and develop corresponding mitigation plans. To support scenario planning during a crisis, it is also imperative for the finance function to step up in areas such as forecasting costs and revenues, and conducting impact analyses on pricing, capital expenditure and funding.

"Many accountants wear several hats, including performing strategic planning, risk management, scenario modelling and financial reporting functions. The Covid-19 pandemic has placed significant focus on each of these disciplines as organisations respond, recover and recreate themselves in the face of the pandemic," says Gavan Ord, manager - business & investment policy, and Asia policy lead at CPA Australia.

He adds: "To what extent organisations return to pre-crises practices, or undertake a radical transformation of attitudes, processes and practices, remains to be seen. One thing which should, however, change is greater acknowledgement of the value of strong risk management practices. Too many organisations, especially in the SME sector, fail to spend time adequately identifying emerging risks and hence managing them."

Company boards will also have to play a bigger role in risk management, as the unprecedented scale and pace of disruption in the market requires a new way of thinking about risk and transformation.

"As market disruption and changing stakeholder expectations re-write the risk landscape, board oversight priorities need to keep pace. Boards must have a robust governance structure in place to enable them to re-prioritise top risks. Boards may also consider asking companies to redefine risk reporting to reflect the dynamic risk landscape and question if more data-driven insights are needed," says Mr Loh.

While the return to the new normal will not be uniform across industries and markets, the need to build resilience will be a consistent theme for businesses in a post-pandemic world going forward. Says Mr Ord: "Some organisations will have a lower risk appetite while others will struggle with the financial or workforce capacity required to take advantage of emerging opportunities. One thing is certain, however, many organisations will look to build resilience into all aspects of their business."

How to get tough in a crisis

CHNG Lay Chew, Singapore divisional president, CPA Australia, details the areas that organisations should focus on in their efforts to enhance their resilience.