A risk management playbook for improving organizational resilience

Why It Matters. MIT Sloan experts offer a systematic approach to organizational resilience that can help leaders manage risk and rebound rapidly when catastrophic events strike.

Consider the recent system failures at Southwest Airlines that put the brakes on holiday travel. Or the Deepwater Horizon oil spill or the Norfolk Southern freight train derailment, both of which rapidly became hazardous-waste disasters.

What do these high-profile incidents have in common? They were unexpected, catastrophic events where system responses consistently lagged behind the incident despite numerous opportunities for intervention. In fact, some of the underlying problems had existed and were known about for a prolonged time.  

With so many public examples of the debilitating consequences of inadequate resilience planning, why do so many organizations continue to fail at mitigating risk?

The reason, according to MIT Sloan professors John Carrier and Retsef Levi, is that most companies operate without proper awareness of the operational boundaries of their systems and therefore fail to detect in a timely manner that their regular operations have been disrupted.

Organizations lack insight into what their enabling operating conditions are (be they significant or seemingly innocuous) and whether they are threatened, the scholars explained during a recent webinar hosted by MIT Sloan Executive Education.

Hospitals offer just one recent example, they said. Masks and gowns are among the cheapest supplies in a hospital yet are critical enablers for surgery. But before to the COVID-19 pandemic, few if any health care organizations would have prioritized personal protective equipment, because there was no prior indicator that supplies would be at risk.

Resilience, the professors maintain, is an organization’s ability to:

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