Incentivising organisational resilience

Businesses need to believe they are going to be impacted, that they can reduce this impact through their own actions, and that it is an essential part of business to do so.  Those who believe these things invest in resilience.  However, it is not enough to rely on the ‘enlightenment’ of businesses to act in their own self-interest.   Businesses must be actively nudged and supported.

In June 2017, the National Emergency Management Conference was held in Wellington, with presentations addressing the future of emergency management in New Zealand.  Bryce Davies, the General Manager Corporate Relations at IAG (Insurance Australia Group Ltd.), spoke about resilience as a national issue, where public, private, and civil society organisations must be able to thrive in times of crisis.  But how do we incentivise organisations to be more resilient?

In his presentation, Davies begins by outlining the benefits and limitations of insurance products to support organisational resilience.  Insurance plays a part in building resilience in organisations, yet only 20-30% of businesses have business interruption insurance.  Resilience requires a broad consideration of risks and impacts and how they are managed.  Ultimately, insurance can provide a backstop for organisations in the form of financial assistance, but cannot stop things from going wrong.

What is needed, Davies says, is belief.

Businesses need to believe they are going to be impacted, that they can reduce this impact through their own actions, and that it is an essential part of business to do so.  Those who believe these things invest in resilience.  However, it is not enough to rely on the ‘enlightenment’ of businesses to act in their own self-interest.

Davies provides three suggestions to get organisations to react, and invest in building resilience.

  1.  LEADERSHIP
    Resilience needs led by organisations like MBIE, Business NZ, Resilient Organisations, and local government.  By promoting resilience and providing supporting information, resilience becomes a normal part of business and everyday conversation.
  2. INCENTIVES
    Incentivise organisational resilience is through positive pressure.  A range of public and private sector mechanisms already exist, but they're not used for this purpose.  Regulators and industry groups need to think about how to use the levers at their disposal to drive resilience.
  3.  SEEDING ACTION
    The final suggestion is seeding action.  Here the example given was Government could require the development of sector-wide plans to ensure that services are still provided in times of crisis.  The alignment this would require across agencies and between public and private organisations would draw businesses in and move people away from a traditional focus on response.

The key takeaway from the presentation is that we cannot rely on enlightened businesses to act on resilience.  Businesses must be actively nudged and supported.

Watch full presentation

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