Resilience is most often considered essential for business continuity planning and risk management. But it is also the key to driving a company’s long-term profitable growth, according to new research at Accenture that was designed to measure the connection between corporate resilience and the ability to create value.
With disruption and change the ever-present new “normal,” resilience matters more today than ever before. This point is highlighted by what we found after analyzing the performance of 1,615 of the world’s largest publicly traded companies across 18 industries with our Resilience Index. The Index measures companies across six dimensions we have found critical to resilience: financial strength, sales, technology, global operations, talent, and sustainability.
So, what did we discover? Only 52 per cent of high-performing companies—those with above-peer-set revenue growth and profitability—outpaced their peers continuously through the business cycle running from the fourth quarter of 2019 to the third quarter of 2023. Forty-eight per cent with profitability and above-peer-set revenue growth at the outset slipped below their peers in terms of growth, profitability, or both. And 11 per cent saw a complete reversal of fortune, falling from the highest performance levels to the lowest, trailing behind their competitors.
Resilience Is Predictable and Predictive
Our research showed companies need a holistic vision and investment strategy for resilience, which we define as the capability to cope with and capitalize on fast-changing markets. After all, we found evidence that a combination of financial and non-financial strengths captured in our Resilience Index—such as a company’s ability to hire talent and invest in technological innovations—drive and predict long-term high performance. Companies with the highest ratings across all our Resilience Index’s dimensions also had the strongest performance.
In addition, we discovered that companies that build a resilience-focused culture, while investing in multiple resilience-enhancing capabilities and developing the talent needed to unlock the potential of new technologies, have what we call higher “returns on resilience,” meaning faster-growing revenue and profit margins over the long term.
Building resilience-focused culture
Chief executives need to make resilience a personal mission to create truly resilient corporate cultures. In a separate study, we surveyed 570 company CEOs and 2,700 of their employees around the globe to understand the human aspects of enterprise resilience. We found that 85 per cent of these corporate leaders believe their personal resilience has been tested more in the past three years than at any other time in their careers. Sixty-eight per cent admitted they felt unprepared to address disruptive events.
Yet CEOs need to develop their personal resilience to inspire and mobilize employees. Our study found 58 per cent of employees believe their CEO directly impacts their personal resilience and 67 per cent look to their CEO to determine how well their company can cope with disruption. Those employees who believe their CEO leads with purpose are almost twice as likely to consider themselves “highly resilient” in part because the CEO’s clear commitment and vision permeate the organization. Not surprisingly, these employees are 1.7 times more likely to drive a highly resilient enterprise.
Investing in multiple resilience-enhancing capabilities
Just as people need to pursue a combination of actions like exercise, eating well, and getting enough sleep to remain healthy over time, our research findings show companies must invest in and monitor a mix of capabilities broadly defined to optimize their resilience, especially as more embark on transformations.
As things stand, companies tend to treat resilience as a cost to be paid to avoid potentially major negative consequences of unexpected shocks. They try to improve their resilience by narrowly focusing on point initiatives like improving their cybersecurity or supply chains with minor or no impact on the company’s overall competitiveness. Companies should be thinking about resilience in broad terms while managing what we call their “returns on resilience” to achieve sustainable high performance.
Developing the talent needed to unlock potential of new technologies
Sixty-two per cent of the highest-performing companies in our sample exhibited above-average strengths in technology. We found companies that invest in developing and maintaining technology foundations with advanced technologies like cloud and AI are more likely to sustain a strong financial performance because they have greater flexibility.
When measured across both financial and non-financial capabilities, resilience empowers companies to do much more than survive disruption. It drives and predicts future performance.
By Muqsit Ashraf, Miguel Torreira, Tomas Castagnino, Rachel Barton, Ladan Davarzani / Courtesy Ivey Business Journal
