The UK Chatham House ‘think tank’ has come to the realisation that “Just in Time” models put companies at risk – by reducing their resilience.
Always good to see these groups wake up and smell the roses! However it will be interesting to see if commercial, short-term profits continue to be placed ahead of long-term survivability.
The report “Preparing for High-Impact, Low-Probability Events” notes that the emergence of more of these HILP and Black Swan events indicates a “new normal”.
“This confluence of incidents in recent years has brought renewed concerns over our systemic resilience to external shocks. Governments and businesses remain insufficiently prepared to manage high-impact, low-probability (HILP) crises and shoulder their economic, social and humanitarian consequences.”[P1]
The report suggests that the inter-dependence of the modern economy (and particularly the prevalence of JIT models) and the potential of these HILP event to disrupt communications and delivery – could see the UK economy only able to sustain itself for 1 week before the disruption has severe impacts.
The report talks a lot about the need to build what they call “Business Resilience”. Fortunately they have recognised the need for this to be done as a strategic, rather than operational, initiative.
Enhancing resilience at the strategic level may mean a more fundamental challenge to business models. Firms might choose to hold larger inventories, use multiple suppliers for key manufacturing inputs, regionalize opera- tions to spread risk across different locations, and invest in more resilient infrastructure along supply chains. Yet many of these measures mean deviating from the just-in-time model that businesses strive for in order to maximize short-term profitability. [P15]
Most publications discussing resilience fail to understand that it means different things in the strategic and operational contexts. Resilience is not the new name for BCM -it is a much larger concept than BCM, and it heartening to see the Chatham House support this view.
“… increasing business resilience goes beyond ensuring continuity despite significant disruption, or quick recovery from a crisis. It is also about protecting profit margins and being better placed than competitors to capitalize on game-changers, such as disruption to transport networks.” [P30]
This is an interesting report, and I would encourage anybody with an interest in Critical Infrastructure, resilience or BCM to read it.
Appreciate any comment from those who have read it.