[OPINION] Turning volatility and uncertainty into a business opportunity

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There is a growing understanding that over time, even the most risk-aware organisations can experience low-probability, high-impact events. These occurrences, commonly called “Black Swan” events, can fundamentally change businesses and entire industries.
Whilst most companies have measures in place to respond to such events (for example, crisis management, disaster recovery and emergency response plans), traditional resilience management is often inadequate to effectively deal with extreme occurrences. Such efforts are often overly tactical, developed with limited engagement from the business, and disconnected from financial metrics. In these cases a business can underestimate the impact of a crisis, or over-estimate what is important to the business.
There is an opportunity to benefit from such challenging events; however few organisations are adequately prepared to take advantage of this upside. The following initiatives provide a framework for organisations who want to take advantage of the opportunities presented by challenging events, whilst protecting themselves against associated threats.
  1. The importance of an integrated risk management system
Aligning risk management procedures to an overall strategy and financial performance is important, as it allows organisations to pinpoint the assets that require protection and implement measures to ensure their defence in the event of a crisis or acute disruption.
  1. Monitoring events and scenario building
Monitoring events and gaining a greater understanding of the environment in which the organisation is operating is important. It allows organisations to identify potential issues and engage in scenario planning of various events and outcomes. This can help companies identify discrepancies between planned assumptions and how things are likely to play out in an actual event. The advantage of this is that it provides organisations with the opportunity to prepare for the actions needed to not only restore operations and recover lost business but leverage major events.
  1. Business model reconfiguration
By understanding the potential impact of extreme events, organisations can adjust their business models to protect their portfolio against unexpected issues. For example, some lines of business could be too exposed to the potential impacts of a rare event, or unprepared to benefit from the upside of volatility, or could simply be over concentrated in some areas within the market.
Resilience management can be just as important as other aspects of risk management. When a business integrates the management of acute events and disruptions across the organisation with an integrated view of risk categories and exposures, it may be better positioned to protect its ability to grow and achieve its objectives.
Armed with a better understanding of these exposures, organisations can reconfigure their business to gain advantage from uncertain events. By adopting a new approach to volatility and uncertainty, which is more offensive than defensive, organisations can better prepare themselves for success, not only in spite of, but because of, what the future throws at them.
Written by Mark Young, Accenture Australia’s risk management consulting lead.

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