Weighing Resilience

Value, Risk… and Resilience. In turbulent times, decision makers need resilience under diverse scenarios when selecting the best solution.

Greater uncertainty is the new normal.

Take the plight of healthcare leaders: Piled on top of a highly volatile economic outlook, healthcare faces dramatically different futures depending on political and judicial outcomes. The Affordable Care Act may be further eroded… or disappear entirely. The different operating environments under the Act or no Act is immense.

A New Dimension

Standard decision criteria for investment approvals are financial value (e.g. NPV) and risk (potential variation in the financial value). Today, resilience is an equally important dimension.

Take international trade: For many companies the lowest cost value chain looks good on paper. On a mere value & risk evaluation, the best solution will likely be the one that minimizes the costs.

But what are the consequences if trade policies and barriers veer off your projected path? You may have supply chain options that are slightly more expensive but ensure minimal disruption to your most crucial goods under a wider range of future scenarios. Yet these solutions may be rejected because on paper they seem inefficient. A superior solution may well be the one that is the safer bet across a variety of trade outcomes.

Putting It Into Practice

To make their best decisions, CEOs need all the critical facts. Today, resilience is one of those critical facts and deserves a seat alongside value and risk.*  Evaluating value and risk alone is no longer sufficient. Folding resilience assessments into proposals is now critical.

*Admittedly, resilience is always a facet of a robust risk assessment, but it is often worth calling out separately from general risk assessments.

© Dave Wittenberg