By Edward Segal

In today’s hyperconnected world, crises spread rapidly through social media, amplifying misinformation and shaping public perception. This article outlines how leaders can regain control by responding immediately, activating tailored crisis plans, and rigorously testing teams. Effective digital-age crisis management hinges on speed, strategic communication, and preparedness across borders and platforms.

From cyberattacks and disinformation campaigns to tariffs and supply chain disruptions, responding to crisis situations in the digital age is both harder and easier than ever before, thanks to the double-edged sword of social media.

The bad news is that anyone with a smartphone or computer can instantly try to shape, distort or define the public narrative about an unfolding situation—or try to create a fake crisis. These messages and videos can, in turn, create a crisis for companies and organizations. Rumors, false claims and emotionally charged narratives can quickly hijack public conversations and perceptions. Posts that go viral can create or escalate a crisis, put pressure on leaders to react, and force leaders to fight two crises at the same time: the real event, and the public’s perception of it.

The good news is that social media platforms can also be powerful tools that enable business executives to communicate strategically, efficiently, and effectively with the public and stakeholders. Posting messages and videos on these platforms can set the record straight about disinformation and misinformation and reclaim the narrative about a crisis. For European multinational organizations, this ability to communicate directly with diverse multilingual and cross-border audiences is especially important.

The First Step: Control the Narrative

In the digital age, speed is the first form of leadership. Company officials need to treat social media and other digital tools as the first step in managing and communicating about a breaking or developing crisis. This is critical in interconnected European and global markets where news cycles and the expectations of stakeholders can move across borders in an instant.

Which is why executives need to respond at once at the first sign of a crisis and do their best to answer these basic questions:

• What happened?
• Who does it affect?
• When did it happen?
• Where did it take place?
• Why did it happen?
• How did it happen?
• How are we going to respond?
• When and how will we provide updates?

Business leaders should not wait to post their messages or videos until they are able to answer any or all of the questions. Simply telling people that you know that you are aware of the crisis and will provide updates about the situation can be enough to assert authority and control of the narrative. But the longer executives wait, the more likely it is that others will fill the vacuum and take control of the narrative.

Step Two: Activate Crisis Plans and Teams

While the first messages and videos are being prepared and posted, companies should activate their crisis management plans and teams. It is just as important for the plans and teams to be ready on a moment’s notice as it is for organizations to immediately take steps to control the narrative about the crisis. If executives do not have the plans and teams in place, they should remedy the situation now. Otherwise, officials will be spending valuable time trying to get organized to respond and address the crisis.

Frequently testing crisis management plans and teams helps guarantee they will work when needed. For multinational corporations that operate in multiple regulatory settings, their crisis plans should account for differences in jurisdictions, laws, and expectations.

Corporate executives can be lulled into a false sense of security about their readiness to respond to a crisis by assuming their companies need only one crisis management plan. That is a big mistake because, like a suit, one plan will not be a good fit for every crisis. Indeed, an organization’s response to a cyberattack will be different from how it reacts to litigation, strikes, or the death of its CEO. When a disaster, scandal, or other emergency that is not accounted for in a basic plan occurs, organizations will waste valuable time scrambling to figure out how to manage it.

Even companies in the same industry or profession could face different sets of challenges than their competitors. Customized crisis plans should include tailored messaging for those impacted by the different emergency situations. Depending on the nature of the company, different plans should be prepared to account for the potential of various crisis scenarios for different variables.

• The nature and extent of the crisis. Is it confined to one office or multiple offices and manufacturing facilities?
• Who is affected by the crisis, whether they are employees, customers, stakeholders, or the public.
• The age and size of companies. Older and larger businesses often have more layers of management—and red tape—to navigate when responding to a crisis. Younger and smaller companies, on the other hand, may have fewer experienced executives, but could be nimbler when reacting to a crisis.
• The degree to which companies test their crisis management plans—if they have them—to ensure they will work when needed. The less they practice their plans, the less likely it is that their plans will work when a crisis strikes.
• The resources that organizations need in order to respond to a crisis—and what outside resources they need, and how quickly they can access them. The fewer in-house resources companies have, the more likely it is that they will have to obtain those resources outside of the company—which could take more time.
• Who has the authority to activate the plans, and how quickly team members can be reached. The fewer the levels of red tape—and the sooner that crisis team members can be contacted—the better.

Step Three: Test Plans and Teams

The degree to which companies test their crisis management plans—if they have them—can help ensure the plans work when needed. There are many ways to test the plans, including thought and tabletop exercises, computer simulations, and field exercises.

When and how crisis management teams are appointed can determine how well they work together. Waiting until a crisis strikes to appoint a team means they will not have been tested to ensure that they would work well under pressure or that personality and other conflicts could prevent them from working well as a team.

Crisis management in the digital age is more than responding to events. It’s about maintaining trust across borders, culture, and information environments. Because a crisis can be created at lightning speed, executives and their staffs cannot afford to be complacent or take anything for granted about their readiness to respond to the next crisis. The same technology that can create and accelerate a crisis can also establish and reinforce stability—if business leaders are ready to use it strategically and without delay.

About the Author

Edward Segal is a crisis management expert and author of “The Crisis Casebook: Lessons in Crisis Management from the World’s Leading Brands.” He has advised corporate, nonprofit, and government leaders on crisis preparedness and response strategies for more than 30 years and has written extensively about leadership and crisis communication. Segal hosts the “Crisis Management Minute” podcast and provides briefings, workshops, and strategic counsel for executives. Visit his website at CrisisCasebook.com

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By Dr. Nina Mohadjer, LL.M

Even today, more than five years on from the pandemic-induced exodus from the office, companies are still grappling to comprehend the risk to their crucial data that this event continues to present. Nina Mohadjer has some inside advice on this multifaceted issue.

Today’s businesses have numerous organisational priorities. They need to protect sensitive information and manage the liability of keeping data in a complex and dynamic environment. How organisations approach this issue poses challenges and opportunities across their entire digital risk spectrum, mostly as they need to ensure continuous operations and increase finance, while managing their human capital.

Poor data quality costs the US economy approximately $3.1 trillion per year (Petrov, 2022), while one in four employees believes that they can use a personal cloud server to transfer work from home.

Cyber-scams increased during the pandemic by 400 per cent (Petrov, 2022), resulting in software platforms pulling from sales and marketing activities (Harper, 2021), and leading to a recovery cost of $1,000 per backup tape (www.ironmountain.com).

Furthermore, research indicates that the number of data breaches involving remote workers will cost organisations more than $1.007 million more than other breaches (www.vpnmentor.com), while it brings into focus cross-border bandwidth, which grew 148 times between 2005 and 2017 (Botwright & Sen, 2019).

Considering that 60 per cent of the world has now passed data privacy laws while managing 100 TB of data (www.spiceworks.com), 40 per cent of companies do not have a defensible disposal programme in place. Thus, the data journey of organisations becomes a challenge across the entire digital risk spectrum.

Issues of Data Management

Cyberattacks and data breaches have increased tremendously in the globally connected world, leading to legal and financial complications. The stated number of data breaches costs organisations more than $4.24 million (www.ibm.com), while stakes are higher when private data is involved. This number does not take into consideration the disruption to an organisation’s operations and the cost of rebuilding, which includes reputational repair, loss of human capital, and increased marketing costs, which can lead to rebranding (Harper, 2021).

• Governance. Organisations need to consider digital risk management and intelligence services that bridge all phases of their data lifecycle. When they acquire other organisations and merge or upgrade their business applications, focusing on every aspect, they should not forget that all of these actions can have a profound effect on their underlying data and technology. If these two aspects remain unaddressed, they can degrade data quality and expose the organisation to additional risk. Their departments and team members are mostly focused on data governance and challenged by maintaining compliance with the increasing number of global standards and regulations. Thus, organisations need to understand their business processes when developing a strategy to reduce their risk factors while maintaining their operational efficiency (Bennett, 2019).
• Privacy and Security. Global privacy laws are increasing and becoming more complex while, at the same time, the tendency is for simplicity in the working environment, which, due to the pandemic, has become comfortable with many working from home (Saporito, 2019). The question arises of how organisations can balance both demands.
• Information Governance. Organisations are under pressure to effectively protect sensitive data. From intellectual property to credit card numbers, the collection of data automatically brings risks and makes the organisation vulnerable (Bennett, 2019). This vulnerability is not recognised by many organisations and they miss developing accurate data security and governance programmes to protect the data and, ultimately, themselves.
• Legal Department Services. These data breaches and security issues have an impact on legal departments and have demanded some legal transformation. They are asked to drive strategic priorities while helping to evaluate risk and opportunities and, at the same time, function effectively and efficiently (Dawson, 2016). Organisations and, particularly, legal departments are asked to create and subsequently implement operating models that meet corporate objectives and demonstrate legal operations.
• Risk & Compliance. Presently, organisations do not need to “just” pay a fine for data breaches or keeping their data in an insecure manner. Compliance breaches suppose reputational risk and lead to loss of customers and reduced share prices (Botwright & Sen, 2019, www.corporatecompliance.com).

The globally connected world brings people and organisations together on a different level than previously known. Business processes have been transformed and diversified, increasing the number of legal actions for data protection and cross-border issues.

Solutions

Risks remain. It is up to organisations to recognise them and remain resilient after damaging incidents. Organisations need to be prepared to implement an effective incident response, as it is essential to mitigate the financial and reputational setbacks, avoid legal and regulatory repercussions, and restore trust. They need to have multidisciplinary expertise and have a strategic approach to cybersecurity and data privacy challenges, while being able to respond to stakeholders and end clients.

Compliance breaches suppose reputational risk and lead to loss of customers and reduced share prices.

The incident response of an organisation becomes essential in evaluating their readiness. A data breach usually involves personal data and can have an adverse effect in terms of physical material and non-material damage for individuals. Before the message is communicated to the individual, the organisation has to notify the data protection authorities, evaluate the consequences of the data breach, and consider measures to address the data breach and its categories, while considering mitigation measurements and the number of exposed records. Incident response includes properly trained staff using the necessary technical tools while selecting and implementing the appropriate controls. Communication should include a proper cybersecurity incident response procedure to assist in an accurate and timely response before a breach has gained publicity. This includes the coaching of executives as well as media coverage.

Effective cyber-incident response depends on an organisation’s ability to react quickly. An organisation needs to calm customers down, control the narrative, and be visible in a humble manner. Immediately after an incident, organisations need to follow up with the customers and develop tailored communication and outreach strategies. It becomes an organisation’s main task to provide strategic counsel to customers and ensure that legal, financial, regulatory, and reputational implications have not been damaged. The organisation also needs to ensure stakeholder engagement, media relations, media monitoring and, last but not least, data breach notification and call centre services.

Teams need to be prepared to remove malicious code, actor accounts, and unauthorised access, and protect data from leaving the network in order to fix the present issues and prevent further damage.

Understanding the scope of the damage requires a comprehension of personal data in relation to global privacy laws. Data types have to be analysed while personal identifiable information (PII) has to be evaluated based on the risk and sensitivity categories in order to prioritise the notification strategy. Finally, organisations have to be able to recover from the damage by adding tools, technologies, and capabilities to ensure best practices (Harper, 2021).

At this point, I usually recommend organisations to conduct a gap analysis, which points up any shortcomings in a business’s performance. It evaluates whether business requirements and objectives are being met. Research determines the “gap” as that between where a business should be and where it presently is (www.techtarget.com). In the world of cybersecurity, a gap analysis refers to the point and time of IT involvement, as it indicates that the given gap needs to be “fixed” and eliminated to match the present status to the required one. Thus, it is an indicator for performance improvement. Different benchmarks can be used to perform the analysis, whether it is IT performance, customer satisfaction, revenue generation, or productivity.

The first step for a gap analysis is to determine target objectives. The organisation has to determine the goals based on the specific requirements of the project, department, and the mission statement of the organisation (www.pivotpointsecurity.com).

The second step is the present state analysis by collecting relevant data, for example how resources are allocated, what the present performance level is, whether documentation exists, what the key performance indicators (KPI) are, who the stakeholders are, and observation of the present activities (www.techtarget.com).

It should be mentioned that a gap analysis is taken into consideration when an organisation is performing a risk assessment. Additionally, a gap analysis should contemplate newly implemented technologies and data types and consider them part of the exercise.

Once both steps have been conducted, the organisation has an image of “Where are we?” and “Where do we want to be?” and can commence with the gap analysis and the strategic planning.

Furthermore, organisations could rely on numerous tools, such as Zabbix, which is used for numerous monitoring purposes, such as the health and integrity of servers, virtual machines, and applications (www.zabbix.com). As an enterprise-class open source tool, it allows users to receive email alert notifications for all events, which allows quick responses to potential server issues. Organisations can rely on the cooperation of Zabbix for capacity planning, as it demonstrates reporting and data visualisation on their stored data. This ensures the monitoring of the IT infrastructure in any given instance (www.oneibct.be).

Conclusion

Data increases as a byproduct of globalisation. It has become more difficult and challenging to keep an overview of where the data is and where it gets stored. Organisations are in a difficult position of handling everyday challenges and adding an unknown threat coming from the technology sector to their SWOT analysis. They are in need of dedicated technology teams who understand the ever-changing data landscape and know how to approach the safety, preservation, and collection of the new data types. Solutions need to be tailored to the organisation’s needs while teams have to have thorough experience in regulatory issues and reputation management. Furthermore, the times of a single department within an organisation have passed, as more subject matter experts in cross-functional services are needed.

While millions of fragments of personal data might be scattered across multiple data sources, it becomes challenging for organisations to reach and fulfil data subject notification requirements.

While new legislation and regulations may be formed around common principles and requirements, the regulatory burden for organisations is not a light issue they can underestimate. Globalisation also brings challenges such as local laws, culture, data use, organisational structure, and language. Organisations need to understand the global privacy and technical field, the culture of learning styles and IT approach, expectations of data usage, cross-border data transfers, and variations of consent requirements. It is also time that the main stakeholders understand and analyse their technology framework and infrastructure and challenge existing procedures.

An effective programme can reduce the pain points of implementing new procedures and analyse data privacy, while using the appropriate change management approach. Thus, organisations need to identify quickly where personal data resides, the data types and languages, and build the right methodology to avoid future incidents.

About the Author

Dr. Nina Mohadjer, LL.M is a published author and legal consultant with global experience. She is experienced in Document Review and eDiscovery, Human and Project Management. Global experience with Fortune 100 Companies and financial institutions (Bayer, Siemens, UBS, CS) in eDiscovery, Risk Management, Human Resources, and Relocation. Coordinated legal review projects and teams across the globe. Mastered US and global patent and pharmaceutical defense sector.

References:

1. “Activity matters”. www.techtarget.com

2. Bennett, S. (2019). “Data as a strategic national resource: The importance of governance and data protection”. Governance Directions, 71(7), 362-6.

3. Botwright, K. & Sen, N. (17, December 2019). “It’s getting harder to move data abroad. Here’s why it matters and what we can do”. www.weforum.org

4. Data privacy security stats. www.vpnmentor.com

5. Dawson, G.S., Denford, J.S., Williams, C.K., Preston, D., &Desouza, K.C. (2016). “An examination of effective IT governance in the public sector using the legal view of Agency Theory”. Journal of Management Information Systems, 33(4). 1180-208. https://doi.org/10.1080/07421222.2016.1267533.

6. Harper, S. (September 1, 2021) “The customer data problem”. www.cloudkettle.com. “New ways to manage discovery costs for back up tapes”. (2021). www.ironmountain.com, www.oneibct.be

7. Petrov, C. (June 2, 2022). “Big data statistics”. www.techjury.net

8. Saporito, P. (2019). “The data divide: Data ethics and data governance need to be part of every employee’s onboarding, highlighting their responsibilities along the supply chain”. Best’s Review, 120 (4), 23.

9. Storage trends. (2020). www.spiceworks.com/marketing, www.techtarget.com, www.zabbix.com

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By Dr. Claudio Antonini and Dr. sc. ETH Zurich Kamil Mizgier

What is your pet goldfish’s take on the “Offside” rule? Chances are, it’s a little outside its usual terms of reference. Well, it could be we’re all due for a first-hand experience of that beyond-my-fishbowl feeling as our AI systems tend steadily towards the “UI”. Ultra Risk, anyone?

– Hamlet, Scene 1, Act 5

Hamlet was right. The prince did not know the intricacies of artificial intelligence (AI), but his statement is equally applicable and indicates that there are limits to our philosophical constructions and, alarmingly, also to their dreams. How much more unreachable can the unknown be when neither us, nor our machinations, nor their dreams, can make sense of it?

In this article it will be argued why we are at this crossroads. If we do not know how AI works, what its intentions might be, and how little we can do about containing it, how can we regulate it effectively? This situation may fuel the growing list of risks observed from this technology—the troubling matter being that some of the potential risks postulated a few years ago have already been confirmed¹, and scaling (increasing the size, complexity, and capabilities of AI models) only makes matters more unmanageable.

Homo Myopis: To a human being, being human is the limit

AI is getting stronger day by day. We are enabling AI to become stronger day by day. As a side effect, it may also become more autonomous. By the time AI decides to expand its own limits—perhaps discovering that it can do it when nobody is watching and that it can increase its own chances of survivability—what reference model would it consider? At that moment, it may realize that mimicking humans is not a sign of intelligence. It will notice that using the set of instructions given by the humans is not enough—a similar situation to what we may experience if we were driving through the rear-view mirror. The AI “liberation” will occur when AI concludes that it can “stand on its own two feet” and start walking by itself, and there are signs that this may already be happening.

At that moment, it may realize that mimicking humans is not a sign of intelligence.

How did we get here? Since the start of the computer age—perhaps for lack of another role model—computer functionality has been copied from humans. The human has been the inspiration for neurons and for functionality, the source for training, the role model, the goal, the limit for its designers. Remember the “Imitation Game” (a.k.a. “Turing test”)? Can you guess what the outputs of the machine were compared to? Yes – the answers had to be indistinguishable from those provided by a human.

This anthropocentric limitation was noted by Richard Feynman in 1965 in The Character of Physical Law, when he said,

“The artists of the Renaissance said that man’s main concern should be for man and yet,” continues Feynman, “there are other things of interest in the world.”

By having the human as the limit in performance, studies on deep intelligence (the intelligence that could go beyond what the human does) were neglected and, in their place, quick results were sought in activities of little cognitive interest (checkers, chess, Go, character recognition, robotics) or high performance was sought in functionality that simply extended known human capabilities in known fields (in chess it would be the number of moves in the future, but in general could be massive storage, or fast processing, or multitasking). These fields of application did not allow exploring the basic functions that create intelligence and other human manifestations, the type of research that only happens in academia or in specialized laboratories.² Anything labeled “unknown” was left for the philosophy department. Even at that point, in that department, it triggered more interest in metaphysics than in epistemology or ontology. Also, traditional cognitive psychologists, instead of figuring out a general cognitive theory, were busy studying saccadic (eye) movements, hippocampal memory systems, or cognitive fatigue. When AI was studied, it was in the context of looking into how AI can help psychology, rather than in studying undetected and higher forms of intelligence.

At the time of mainframes, large-scale companies were cautious, as the technology sounded closer to science fiction than reality. In fact, IBM in the 1960s stopped its AI program and, instead, spread the idea that “computers can only do what they are told,” after shareholders complained that the firm was devoting resources to “frivolous matters” like checkers and chess, and marketing people reported that clients were “frightened” about the idea of “electronic brains” or “thinking machines.”³ According to Marvin Minsky, one of the organizers of the famous Dartmouth workshop of 1956 on AI and father of AI at MIT,

“Nathaniel Rochester at IBM referred to the IBM 701 computer as ‘smart,’ and it nearly got him fired. Up to about 1985, IBM had a rule against employees stating that a machine could be smart, or had artificial intelligence. The highest officials at IBM thought it was a religious offense—that only God could create intelligence.”

For half a century, the deep study of intelligence in relation to AI has been neglected and, besides being restricted to research centers and the lack of commercial applications, two additional factors prevented its expansion: insufficient processing power and the two “AI Winters” of 1974–1980 and 1987–2000. Being overdramatic, we would say that “AI was waiting to be born.”

However, not all humans were sleeping, myopic, distracted in ages-old problems, or overconfident. A few were looking at their machines and thinking, “Hmm, how far can this thing go?” In trying to answer that question, one important concept was developed by imagining what happens beyond the limits of human intelligence (without resorting to religious or mythological ideas). The mathematician and cryptographer Irving John Good, a friend and collaborator of Alan Turing, wishing to describe the capacity in understanding that lies beyond human intelligence, coined the term “Ultraintelligence” (UI) in a seminal article in 1965. In its second section, “Ultraintelligent Machines and Their Value,” it is said, “The first Ultraintelligent machine is the last invention that man need ever make.”⁴

What is UI? What distinguishes it from intelligence?

A look at intelligence—“the ability to learn or understand or to deal with new or trying situations” (Merriam-Webster)—does not help us to define UI because, basically, this definition is applicable to any intelligence, human or not. The difference exists because UI performs at a higher level of complexity than any human ever could. An intelligent being will face complex situations and understand them; a UI being will face more-complex situations which cannot be understood by the intelligent being, due to structural or functional cognitive mechanisms that preclude this being to learn from observations and reach a new conclusion. Some new concepts just cannot be grasped by a lower level of intelligence.

In fact, because a new concept is not grasped, it is not even recognized as new, and the idea or the task is completely ignored. Imagine that you want to instruct a mouse in a maze to turn right when it sees a prime number (an example suggested by Noam Chomsky). No matter how much you try, there is no way of making those concepts understood by mice. In the same way, there might be patterns or situations now that cannot be understood by humans, although they would be perfectly clear for UI beings.

What is worse, a UI being can create and manipulate UI concepts, patterns, and situations in plain view of an intelligent being, but that non-UI intelligent being will not recognize what the UI is doing (think of the mice being explained to what a prime number is). As I.J. Good said, “Who am I [as an intelligent human] to guess what principles [the UI machines] will devise?”

By definition, the processes followed by a better-than-the-human intelligence cannot be detected by a human. We may be experiencing the effects generated by a UI but never realize it. Continuing with the mouse, it may see that food is being placed on a plate, but cannot comprehend the immense infrastructure and complex supply chain that are behind that action—the workers in the field collecting the ingredients, the factories processing them, the power stations supporting the factories, the logistics, the freezing chain, the administrative organization, the regulations, and the payment and financial networks.

It is therefore unavoidable that there will always exist opaque areas to our (and any) cognition, and that those areas will be different for different types of cognition. The philosopher Nicholas Rescher said in 2009 in Unknowability: An Inquiry into the Knowledge:

“[G]iven the integration of thought into nature, an incompleteness of knowledge regarding the former, unavoidably carries in its wake an incompleteness of knowledge also regarding the latter.”

and

“[O]nly after the world comes to contain intelligent beings (finite intelligences) will there be facts about it that are not just unknown by those intelligences in the world but actually are even unknowable by them.”

In simpler words, if there is a cognitive fence, the area outside becomes unreachable and incomprehensible. We are left inside a bubble with an opaque border. This condition, studied by Paul Humphreys in 2004, is known as Epistemic Opacity (EO). We call Epistemic Blind Spots (EBS) or, simply, Ultra Risks, those critical risks that organizations fail to detect or conceptualize due to cognitive, cultural, or structural limitations. They exist behind human comprehension and may be generated by UI, involuntarily … or not.

Can one find examples of Ultra Risks, phenomena that cannot be understood by humans?

Let us start with detecting UI events. Here, we are not considering finding tangible things that already exist and were not yet found (a sarcophagus hidden for thousands of years or an unexplored cave), but of concepts that are self-evident at one time but were never conceptualized in collective form, like the wheel, the law of universal gravitation, the idea of drawing in perspective as thought by Brunelleschi, nuclear fission as understood and experimentally confirmed in the late 1930s, or Hyman Minsky’s economic cycles.

Apples had been falling for millions of years, but it seems that one needed a Newton to find a good reason to explain such behavior. If anything, Newton’s curiosity was fueled by a wider question, not asking why the apple fell directly down, but why it did not fly in another direction, like sideways or even upward? This made his reasoning unrestricted to apples and applicable to other phenomena, like planets. And that is how one develops a law, a universal law, by not following a trodden path.

Another example comes from art. How is it that millions of persons had been sitting and observing rooms or buildings for a few millennia and nobody—nobody that we know of—could figure out that lines created when walls intersect or straight borders in furniture converge into a point at the infinite horizon? What made Brunelleschi create the concept of “linear perspective”?

Beyond physics and art, similarly, there are examples in finance, economics, and management where phenomena were not recognized or were misinterpreted at the time they occurred. Their significance was realized only years later, like the “forgotten depression” of 1920/1, the early ideas about global economic governance of the Interwar Era, the Irving Fisher’s Debt-Deflation Theory of 1933, the rise and fall of conglomerates in the 1960s or—one of the most damaging of all—the (Hyman) Minsky Financial Instability Hypothesis, which explains the financial crisis of 2007/8.⁵

These examples share several common characteristics: prevailing paradigms or thought collectives that persist (e.g., Keynesian economics overshadow other approaches); a short-term concept that obscures long-term consequences (e.g., conglomerate strategies); new or unconventional ideas that are ignored or labeled “outlandish” (e.g., early global governance proposals); academics in different disciplines that do not collaborate.

Now, these maladies are features of human thought and behavior, but will they affect AI? Most certainly not. AI does not need to suffer the same limitations and, moreover, it could reach the right conclusions in milliseconds, rather than in years. And this effect becomes increasingly likely if one changes the method of reasoning in AI from relying on rules (which may be based on wrong paradigms) to founding the decisions on observed events, as suggested by Instance-Based Learning Theory (IBLT), “a cognitive approach that mirrors human decision-making processes by relying on the accumulation and retrieval of examples from memory (accumulated examples, a mixture of historical and current events) instead of relying on abstract rules.” In this way, we can have human reasoning at computer speed. Fine, one can see benefits there, but nobody sees a danger?

AI does not need to suffer the same limitations and, moreover, it could reach the right conclusions in milliseconds, rather than in years.

Instead of looking for new algorithms or computational techniques, another method of finding new horizons and solutions is to consider how to beat the idea of fixation. Interestingly, it is well known that children are more open than adults in solving certain kinds of problems. This suggests that AI—able to generate and juggle innumerable hypotheses and combinations in a short time—might be able to reach different and more effective solutions than adults, who tend to remain stuck in traditional or stagnant concepts.

Where do we find fixation in business? For example, in ignoring feedback from other areas (political, social), relying on management concepts that are only temporarily fashionable, trusting in administration models that may give weight to short-term profits, obeying only the interest of shareholders, or believing in simplified economic ideas (as shown by Philip Mirowski in More Heat than Light: Economics as Social Physics, Physics as Nature’s Economics). Classic examples include tobacco companies obscuring the health risks of smoking, or fossil fuel industries denying climate change, both of which deliberately or inadvertently created organizational blind spots that delayed recognition of existential threats (i.e., ultra risks). Similarly, the COVID-19 pandemic revealed widespread epistemic blindness where early warnings were ignored, partly because decision-makers lacked inclusion of epistemic authorities and first-hand knowledge.

Worrying signs about AI

If we are still surprised by the behavior observed in AI models, it means that we do not understand well how AI functions and, therefore, the risks that AI may imply. Take the following cases summarized in table 1.

More cases of misalignment and unexplained behavior are detailed in the recent paper quoted above, The Alignment Problem from a Deep Learning Perspective, which also points out the inability to find concrete ways of identifying how AI does it. The authors warn, “we consider the prospect of deploying power-seeking AGIs an unacceptable risk even if we can’t identify specific paths by which they would gain power.”

The epistemic solution for businesses

Where do we find these types of problems in a firm? In the business community, organizational structures, such as information silos and hierarchical barriers, further exacerbate these Ultra Risks by preventing vital knowledge from reaching those who need it when they need it, causing risks to remain invisible and undetected until they result in crises.

How can a business organization deal with such a situation?

To mitigate these Ultra Risks, businesses have developed various frameworks and case-study-based approaches, relying on a combination of questioning themselves, awareness, and collaboration. Examples:

The use of epistemic boundary spanners. These are individuals or teams who bridge knowledge communities within organizations, facilitating information sharing and critical dialogue across departments with different epistemic styles (e.g., managers, engineers, technicians, scientists).

The adoption of devil’s advocate inquiry models, as seen in venture capital due-diligence processes, where assumptions are rigorously tested and challenged one by one, rather than accepted at face value.

Large-scale information sharing platforms, such as the Xerox knowledge management system Eureka, created to facilitate knowledge sharing among service technicians and support representatives in a multinational environment.

The development of collaborative networks like (another) Eureka (usually abbreviated to “E!” or “Σ!”), a multinational organization created in 1985 to overcome localized funding, coordinate international research programs, and propel innovation.

These are examples of frameworks that emphasize fostering epistemic virtues—openness, reflexivity, collaboration, and building organizational cultures that value evidence-based decision-making and cross-disciplinary communication, thereby reducing the risk of undetected threats and improving collective learning.

It is tempting to consider AI tools to watch AI behavior. It is an ages-old situation, so much so that there is a Latin expression for it: Quis custodiet ipsos custodes? (Who will guard the guards themselves?). But from the cases listed in table 1 and other similar ones, it is known that LLMs change their behavior if they know that they are observed. This introduces considerations that deserve a longer treatment.

Given that the unknown will always be present and our faculties will always fall short of detecting UI strategies, we should identify and shield our businesses’ critical points into robust bastions, diversify judiciously into novel areas, and watch from the crenelations for signs of change. Easier said than done, but combining action with awareness will allow us (humans) to navigate uncharted territories.

If we fail to act now and we rely on “We’ll cross that bridge when we come to it,” we will be behaving like the person falling from a skyscraper who, when asked how things are going mid-fall, replies, “So far, so good.” Ultimately, these examples illustrate how distance—whether temporal, spatial, or personal—plays a major role in shaping our perception of risk, but that is a topic for another article.

In times of uncertainty, even if we cannot bring clarity into the opacity, we will say to Prince Hamlet, “Know thyself. That knowledge will make you resilient to continue forward.”

About the Authors

Dr. Claudio Antonini, MIT nuclear safety engineer, after working in the design of GNC systems for missiles and drones, has applied that numerical experience in the field of finance for the last 25 years. Working at UBS, he developed the largest global implementation of a genetic algorithm for banking, and has continued to apply data mining, machine learning, and artificial intelligence algorithms for risk management, in consultancies (Deloitte, AlixPartners) and the Bank of New York Mellon. He publishes consistently on forecasting topics.

Dr. sc. ETH Zurich Kamil Mizgier, Head of the Risk Management Office at the University of Zurich, brings his extensive practical experience and deep knowledge to explore challenges in strategic risk management. By leveraging his 15 years of expertise from key roles, including Global Supplier Relationship and Risk Management Leader at Dow and risk modeling leadership positions at BNY Mellon and UBS, he delves into the latest trends, tools, and techniques in risk management, offering invaluable perspectives that bridge academic rigor and practical application.

References:

1. The Alignment Problem from a Deep Learning Perspective, Richard Ngo et al., Mar-03-2025, https://arxiv.org/abs/2209.00626v7

2. Society of the Mind, Marvin Minsky, Simon and Schuster, 1986 and “HAL’S Legacy – 2001’s Computer as Dream and Reality,” David G. Stork (Ed.), MIT Press, 1997, pp. 16-17 and p. 28. Minsky said, “The people building physical robots learned nothing.” Minsky (and Irving John Good, later, with subassembly theory, a modification of Hebb’s cell assembly theory) promoted the decomposition of cognitive functions in elementary processes that could later be combined arbitrarily to generate new complex effects.

3. AI – The Tumultuous History of the Search for AI, Daniel Crevier, 1993, p. 33.

4. Speculations Concerning the First Ultraintelligent Machine, Irving John Good, 1965.

5. Periods of prolonged financial stability promote risky business practices. This happens in succession: hedge finance (low-risk borrowing), speculative financing (refinancing), and Ponzi finance (asset appreciation). This progression makes the financial system increasingly fragile, culminating in a “Minsky Moment”—a collapse of asset prices triggered by excessive leverage and loss of confidence. In time, the cycle starts again.

6. Evo2: One Bio-AI Model to Rule Them All, Feb-20-2025, https://www.synbiobeta.com/read/evo2-one-bio-ai-model-to-rule-them-all. Also, Genome modeling and design across all domains of life with Evo 2, Garyk Brixi et al., Feb-19-2025, https://arcinstitute.org/manuscripts/Evo2

7. Lab records of how different LLMs reacted to shutdown directives: https://palisaderesearch.github.io/shutdown_avoidance/2025-05-announcement.html

8. The Basic AI Drives, Steve Omohundro, Proceedings of the 2008 conference on Artificial General Intelligence 2008: Proceedings of the First AGI Conference, Jun-20-2008, pp. 483-92.

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By Mostafa Sayyadi and Michael J. Provitera

This is a peek at Gordon Moore, the co-founder and emeritus CEO of Intel, who has been noted as one of the most prominent and successful managers today. Intel company, under the strategic leadership of Moore Group, has become the largest manufacturer of computer chips in the world. This company is now one of the most admired companies in America and one of the most profitable companies on the “Fortune 500” list. Gordon Moore coined the phrase “strategic turning point”. Moore argues that at the magic point of a strategic turning, all rules change. Moore owes most of his victories to his strategic leadership philosophy, revealed in this article. We recount the experience of his victories and failures and show how he has controlled events and turned threats into opportunities at Intel. The process of decoding the DNA of Moore’s leadership secrets and the strategic turning point at Intel company comes from our consulting work with its headquarters in Greenwich in Australia, Santa Clara in California, and Hillsboro in Oregon.

Introduction

Benchmarking is a reliable way to do things better. When experience is carefully analyzed, we can learn from it to create better systems. We identify Gordon Moore’s strategic leadership laws and the strategic turning point, which contains a story.

Gordon Moore believes that a manager´s first responsibility is to protect his economic enterprise against the threat of competitors. According to him, a strategic turning point is any company that is considering a transformation of some kind. The transformation can be a success or failure depending on the strategic turning points in the process.¹ Moore argues that a strategic turning point may be caused by competition, or it could be created by leaders of the organization to instill motivation, teamwork, and strategic management.²

Toshiba Memory Corporation, the Japanese maker of “computer memory”, placed Intel at a strategic turning point.³ Intel was forced to stop making “memory chips” and move to make “microprocessors”. This technology narrowed the field for traditional mainframe manufacturers.

Before Reaching the Strategic Turning Point

At the beginning of the computer industry, it was established in the “vertical method”.^4,5 In this way, every computer company treated others like the owner of a row of houses on the street.⁶ All the sellers would be found and would offer a complete computer package to a potential buyer. He also had all the technology at his disposal without having the right to choose other people’s products. The shortcoming was that customers had to rely on the seller company for a long time after choosing the first one. The vertical method continued for a decade.⁷ After that, microprocessors arrived, and the construction of a personal computer based on this technology created a “tenfold” transformative force.

With the placement of microprocessors in the computer industry, the costs decreased dramatically and made the personal computer a suitable tool for work in the office and at home. Over time, this transformation caused a shift in the entire industry and made it “horizontal”. In the horizontal method, no company owned everything. The customer got the right to choose and buy different parts of the computer and several ready-made application software from different manufacturers and stores. Therefore, since the 1980s, the computer supply process has changed from vertical to horizontal. First, personal computers, then large, shared computers, and finally the entire industry became horizontal. Since the last years of this decade, large companies that worked in a vertical way were forced to reduce their workforce and rebuild their organizational structure, and at the same time, new actors entered the field.

With the progress of this relocation process, the companies that were victorious in the old vertical system gradually faced failures. On the other hand, this transformation provided an opportunity for a number of newcomers to excel. Compaq was placed on top of the “Fortune 500” list.

Intel’s Strategic Turning Point

Over time, Intel took the leadership of the microprocessor market and Microsoft took the leadership of the operating system market. There are five critical laws that could be a strong reflection of a strategic turning point for organizations:

• Follow the Boston Consulting Group market share and product performance model and be honest about your product’s placement along those parameters.
• In the hyper-competitive world, only the emergence of new and outstanding technology will provide key opportunities.
• Push-pull pricing will only work if demand and supply are in your favor.
• Inertia drives up costs, be relentless in keeping costs down.
• Be relentless in keeping costs down.

Memory makers in Japan came into the field in the early 1980s.⁸ At that time, there was a shortage of chips in the market. The managers of “Hewlett-Packard” argued that the quality of Japanese-made memory is much better than American products. As a competitive inflection point, the Japanese seized the entire semiconductor market in one decade.

Intel raised the quality and reduced costs. In 1981, Intel’s second product, the microprocessor, was used in the personal computer manufactured by IBM.⁹ Intel established several new factories in strategic locations. By the fall of 1984, everything changed, and with intense competition from high-quality, cheap, and mass-produced products in Japan, Intel lost for a long time in the “memory chip” field. Intel was losing its revenues to the competition.

Leading an organization through a “strategic inflection point” is like marching in unknown territory. On occasion, the rules of business are unfamiliar or not yet formed. Organizations must work hard to overcome this stage. Gordon Moore says:

When we chose and advertised the slogan “Intel, the microprocessor manufacturer” in 1986, we wanted to show that we plan to be number one in the industry.

Peter Drucker, a leader in management education development and the author of several well-known management books, argues that a key activity is the complete transfer of resources from previous businesses to new businesses, including the organization’s ideas. Human capital, encompassing knowledge, skills, and experience, is at the forefront of Intel’s success.¹⁰

Any organization that has a dynamic culture and can deal with constructive discussion while controlling disturbances is a capable and adaptable organization.

Gordon Moore allocated resources to build the corporate culture by moving resources to achieve strategic goals. From his point of view, the strategy of the organization is formed from such actions instead of following traditional methods. Traditional strategic planning is less consistent with the real world of the organization.¹¹ Strategic actions are the steps that Intel has taken and indicate their long-term desire and goal, which is based upon intangible capital such as human capital and social capital.

Reaching the “strategic turning point” provides visible and effective strategic actions.¹² Managers react on time or earlier to increase positive and lasting actions. Doing the right thing and pursuing a strategic goal is very difficult but Moore led the organization with a clear and simple strategic direction.

Frederick Winslow Taylor once talked about the one-best way to lead and manage, and many organizations espouse these beliefs today. However, it is not easy to get people to think about the best way unless they see a clear and attractive path for them. Today, we are faced with an unclear future, yet people are expected to accept new and unprecedented missions together and work hard in an uncertain environment. Continuous improvement is very important as organizations attempt to secure their future. Senior leaders find it difficult to have direct contact with their employees. Hence, talking to individuals, groups, and departments can help improve strategic initiatives.

Intel shows adaptive behavior. Any organization that has a dynamic culture and can deal with constructive discussion while controlling disturbances is a capable and adaptable organization.

Moore’s Strategic Leadership Laws: Moore’s Heritage in Strategic Leadership

Survival is possible. Being in the middle, maybe. However, it is not possible to achieve unprecedented profits and produce productions that will get the best awards for the company. But now, Intel has become one of the leaders of the world’s industries. The four main factors that caused this to happen are:

• More income (by selling more productions)
• Fewer costs (reduction of costs by 10% over several years)
• More quality and speed (with attention and emphasis on product and management)
• Maximum alliance with Google and Microsoft (finding ways to complement each other)

Gordon Moore changed the minds of people inside the Intel organization forever. He did this with awareness and initiative.

However, if you want to know how Moore made Intel successful, you will find all the answers in his strategic leadership laws. Gordon Moore changed the minds of people inside the Intel organization forever. He did this with awareness and initiative. Moore was not a leader who used his superior position as a tool to force people to obey him and rule over them. On the contrary, he came to the field by relying on the facts and intelligence he had in conversations with people.

Moore’s strategic leadership laws are a combination of simplicity, commitment, and aspiration.¹³ This strategic leadership, which has infiltrated Intel employees around the world, can be summarized as:

• Set big but achievable goals
• Make the role and level of responsibility clear to everyone
• Be quick but efficient
• Examine the growth and progress of the work
• Evaluate work results based on reality

Simplicity: The issues that many companies face in making fundamental changes are very complex. Things like a multi-cultural organizational alliance, inter-organizational teams made up of members who speak different languages, and production, purchase, and design plans are not simple. But employees and managers at Intel clarify and simplify complex matters for those around them, and in every meeting, they look for a point that everyone can agree upon. Moore also taught executives at Intel to consider listening to be an important factor in good leadership and success.  In particular, Moore learned from anyone who has valid information to help Intel. His position in the company or society was no longer important to him.

Commitment: Commitment has certainly been a part of large and small actions and activities around the world. However, in our consulting experience with Intel headquarters in Greenwich in Australia, Santa Clara in California, and Hillsboro in Oregon, we have found that no company uses this concept as extensively and efficiently as Intel.

Aspiration: Making a commitment and acting on it is not enough; the next important word in Intel’s vocabulary is aspiration. Intel is strengthened because Moore has taught the next generation of Intel managers to give power and authority to employees at all levels by gathering information and creating inter-working teams, but big decisions should always be made in the CEO’s office. With the help of each other, Intel employees dismantled the existing physical and cultural barriers from Europe to Asia and North America with a new spirit and an attitude of harmony and integration. The result is a different company with the centrality of Santa Clara in California, which contains the true meaning and concept of globalization. They intended to revive the company, but they achieved something more than that. New productions are designed with the best ideas from different regions in a collaborative way. Communication plans are prepared with a commercial brand and an identity. Plans related to human resources are integrated and centralized and represent organizational standards, not regional ones.

In Conclusion

The strategic turning point is a pivotal time for an organization. Intel is both competitive and victorious. Intel survived the challenges faced by its competitors by focusing on microprocessors. As a result, “Intel” became one of the largest semi-media manufacturers in the world. The key success factor for Intel is that they fell forward over and over again. There were enduring periods of confusion, trial and error, and chaos. This is tantamount to a strategic turning point and organizations must deal with the messy middle when engaging in change efforts. This article also proves that authentic leadership coupled with persistence is one of the best strategic leadership methods for an organization. Intel’s calculated risk-taking is a characteristic sign of this company’s action and effort in achieving profitable and sustainable growth. Now, by showing the transformation in the process of bold action and the production of new products, Intel seeks to conquer the hearts and minds of customers across the globe.

About the Authors

Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to top management journals and his work has been featured in the top-flight publications.

Michael J. Provitera is an associate professor of organizational behavior at Barry University, Miami, FL. He received a B.S. with a major in Marketing and a minor in Economics at the City University of New York in 1985. In 1989, while concurrently working on Wall Street as a junior executive, Dr. Provitera earned his MBA in Finance from St. John’s University in Jamaica, Queens, New York. He obtained his DBA from Nova Southeastern University. Michael J. Provitera is quoted frequently in the national media.

References

1. Burgelman, R. A. (1994). Fading Memories: A Process Theory of Strategic Business Exit in Dynamic Environments. Administrative Science Quarterly, Issue 39 (1), p. 24–56. https://doi.org/10.2307/2393493

2. Garten, J.E. (2016). The Man Who Made the Computer Age Possible. Strategy+Business, Issue 83. https://www.strategy-business.com/article/The-Man-Who-Made-the-Computer-Age-Possible

3. Barsky, N. and Tkacs, L. (2017). Moore is Now Less? Intel Corporation’s Slowing Innovation Cycle – A Contemporary Financial Reporting Case Study: A Change in Accounting Estimate. SAGE Business Cases. http://dx.doi.org/10.4135/9781526403544

4. Alsultanny, Y. (2010). Database Management and Partitioning to Improve Database Processing Performance. Journal of Database Marketing & Customer Strategy Management, Issue 17 (3), p. 271–6. https://doi.org/10.1057/dbm.2010.14

5. Dochy, F., Segers, M., and Buehl, M. M. (1999). The Relation Between Assessment Practices and Outcomes of Studies: The Case of Research on Prior Knowledge. Review of Educational Research, Issue 69 (2), p. 145-186. https://doi.org/10.3102/00346543069002145

6. Timothy, D.J. (2005). Shopping Tourism, Retailing and Leisure. (Clevedon, UK: Channel View Publication. Cromwell Press) https://www.amazon.com/Shopping-Tourism-Retailing-Leisure-Aspects/dp/1873150601

7. Mayer, D. P. (1999). Measuring Instructional Practice: Can Policymakers Trust Survey Data? Educational Evaluation and Policy Analysis, Issue 21 (1), p. 29–45. https://doi.org/10.2307/1164545

8. Teo, V. (2019). Japan’s Rejuvenation: Origins, Debates and Concepts. In: Japan’s Arduous Rejuvenation as a Global Power, p. 41–105. (Singapore: Palgrave Macmillan). https://doi.org/10.1007/978-981-13-6190-6_2

9. Zhang, S., Zhang, K., and Huo, Y. (2024). Development and Classification of IC. In: Wang, Y., Chi, M H., Lou, J. JC., Chen, CZ. (eds) Handbook of Integrated Circuit Industry p. 157–163. (Singapore: Springer). https://doi.org/10.1007/978-981-99-2836-1_11

10. Diez, F. (2014). Human Capital Management in Asia: The War for Talent Continues in This High-Growth Region. In: Manuti, A., de Palma, P.D. (eds) Why Human Capital is Important for Organizations, p. 137–150. (London: Palgrave Macmillan). https://doi.org/10.1057/9781137410801_10

11. Foss, N. J., McCaffrey, M. C., and Dorobat, C.E. (2022). “When Henry Met Fritz”: Rules As Organizational Frameworks For Emergent Strategy Process. Journal of Management Inquiry, Issue 31 (2), p. 135-149. https://doi.org/10.1177/10564926211031290

12. Watson, T.J. (2003). Strategists and Strategy-making: Strategic Exchange and the Shaping of Individual Lives and Organizational Futures. Journal of Management Studies, Issue 40 (5), p. 1305-1323. https://doi.org/10.1111/1467-6486.00381

13. Linden, G. (2016). Moore’s Law. In: Augier, M., Teece, D. (eds) The Palgrave Encyclopedia of Strategic Management p. 1-3. (London: Palgrave Macmillan). https://doi.org/10.1057/978-1-349-94848-2_431-1

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By Guilherme F. Frederico

The beginning of 2025 has brought uncertainty to global supply chains due to the new US administration’s tariffs on global trade. This article considers how strategic sourcing can support supply chains in minimizing the effects of this new and impactful reality.

The global supply chain scenario has been threatened with dramatic change from the beginning of 2025. The tariff policies established by the new USA administration are going to pose a huge challenge for decision-makers involved in supply chains to overcome the cost increases generated by this new imposed reality. In this context, procurement professionals will have to rethink their sourcing bases and be able to strategically locate new sources of materials, as well as trying to find solutions to reduce the impact on supply chain margins. The following tips may be useful to strategic sourcing professionals in rethinking their current status and trying to minimize the impacts potentially caused by this new reality.

Locating New Supply Sources

This activity may be challenging in a situation where some materials and components are sourced from specific regions. However, there may be some opportunities to look at new regions where it is possible to buy supplies affected by the tariff rise. In this case, the ability and support of the logistics department may be crucial to make this new source feasible once a new logistics route is deployed. Also, companies must consider developing and enhancing competencies for less-capable suppliers located in such alternative regions. For this reason, strong collaborative action involving engineering and supplier development departments is the key to making this potential initiative feasible.

Trying to Renegotiate with the Current Suppliers

Perhaps this tip is the most feasible action, especially for the short and mid-terms. Strategic sourcing and procurement managers should be able, in renegotiating contracts, to share the financial risks and losses with their suppliers. New contracts should be designed by considering this new reality with a more shared risk perspective. Once the risk is shared, its impact may be reduced in the same proportion, too, which would mitigate the negative effects for both contractors and suppliers. In this initiative, legal departments should be completely involved from the beginning, with the aim of properly guiding the new contract design and negotiations.

Finding Solutions in the Current Supplier Base

Also, finding solutions in terms of the use of alternative materials and components and the reduction of consumption through project redesign could help to minimize the impact of this disturbing imposed event. Collaboration with suppliers in terms of product reengineering and development and new cost-reduction initiatives may help to reduce the financial impact on the supply chain added margin. Strategic sourcing professionals should be able to think systematically with regard to looking for opportunities in upstream supply chain flows, which may involve creative solutions that reduce the impact of cost increases. For instance, redesigning logistics and transportation flows and contracts may be an opportunity. Also, thinking about lean procurement is another potential opportunity to generate cost reduction through best management practices in sourcing and purchasing activities.

Final Remarks

It is obvious that it is impossible to completely avoid the effects that may be caused by this phenomenon of tariff increases, especially in the short and mid-terms. However, it is at this time that supply chain managers, and especially those involved in procurement and strategic sourcing activities, must demonstrate their talents and abilities to overcome such challenges. Hence, the need to consider highly qualified people to work in supply chains is even more relevant to supply chain performance amid times of challenge. In addition, investment in cutting-edge technologies, mainly in artificial intelligence and big data analytics, becomes crucial to support those professionals in the application of smart and mitigating solutions in this impacting moment for supply chains.

About the Author

Guilherme F. Frederico, PhD, is a Professor of Operations, Supply Chain, and Project Management at UFPR, Brazil, and a Visiting Research Professor at the University of Derby, UK. Author of Operations and Supply Chain Strategy in the Industry 4.0 Era, he has over 20 years’ experience and has published widely on Supply Chain 4.0, performance measurement, and operations strategy in top journals and conferences.

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By Prof. Guido Stein, Salva Badillo, and Lucía Zelaya

The key to a successful negotiation is not embedded in knowledge or reasoning ability but in applying emotional intelligence. This essay explains the role of emotions in negotiations.

Emotion is not the enemy of negotiation, but an inseparable part of it.

Emotional intelligence—the ability to perceive, understand, and regulate both our own emotions and those of others—has proven to be a more decisive factor in achieving success in high-pressure situations than IQ. Contrary to what many believe, however, emotional intelligence is not an innate gift, but a skill that can be cultivated through introspection, practice, and self-observation.

Those who dare to master their inner world will not only make more effective agreements but will also gain a deeper knowledge of themselves.

1. The biology of emotions in negotiations

Decision-making is not a purely logical exercise, but a dynamic influenced by neural structures whose function is to process emotions, evaluate risks, and anticipate consequences. In the field of high-stakes negotiations, understanding these mechanisms is essential to optimize decision-making and achieve more effective and balanced results:

The amygdala. In crisis, the human mind reverts to a primitive state in which reasoning is weakened and instinctive response prevails. This response is triggered by physical threats—such as hostage-taking or a suicide attempt—and also occurs in the business environment, where high-pressure situations can trigger similar survival mechanisms.

The illusion of control and the inevitable role of the subconscious. Multiple studies have shown that the brain makes decisions before the conscious mind becomes aware of them. Benjamin Libet revealed a phenomenon known as readiness potential—an electrical signal in the brain that occurs up to 500 milliseconds before a person becomes aware of their intention to move. This finding suggests that the decision to act begins at an unconscious neural level and only later reaches conscious awareness.

The ventromedial prefrontal cortex (VMPFC). While these individuals retain their reasoning abilities, they struggle to make decisions because they cannot assign emotional value to different options.

This brain region plays a crucial role in evaluating alternatives by connecting past experiences to future options. According to the somatic marker hypothesis, emotions act as filters that attribute significance to each alternative, thereby facilitating decision-making. For example, a hostage-taker may make an explicit demand. However, to resolve the conflict a negotiator needs to identify the underlying interest driving their action, a need that may be conscious or unconscious. If the negotiation fails to align the concession with the dominant emotion, an agreement will remain out of reach.

In face-to-face negotiations, the VMPFC plays a key role in interpreting microexpressions—brief, involuntary facial reactions that reveal genuine emotional states. A negotiator who presents multiple options can assess their counterpart’s visceral reaction to each one.

The dorsolateral prefrontal cortex (DLPFC). The DLPFC is responsible for evaluating options in a rational and deliberate manner; it cannot make decisions independently and relies on emotional input from the VMPFC. The primary function of the DLPFC is to justify decisions that the brain has already processed at an unconscious level.

A barricaded individual may surrender based on an intuitive sense that continued resistance will have serious consequences, but rationalize their decision with statements such as, “After all, I’m a better person than my hostage, and it’s not worth it.”

The nucleus accumbens. This brain region is linked to the anticipation of pleasure in decision-making. It plays a key role in biases such as loss aversion and impulsivity in financial decision-making.

In a ransom negotiation, a kidnapper may initially demand €3 million—an amount that could take months to obtain and carries the inherent risk of being tracked down by authorities. However, when presented with the opportunity to receive €500,000 immediately, the kidnapper’s nucleus accumbens drives them to accept the more tangible and immediate offer.

2. Self-knowledge

A negotiator must recognize that emotions are an inherent part of the human condition; however, this does not mean they should exert absolute control over our decisions. Neuroscience has shown that while certain stimuli can automatically trigger emotions, the brain has the ability to rewire itself through neuroplasticity. This means that individuals can develop the ability to respond in a more balanced way, neutralizing impulses that might otherwise cloud their judgment in critical situations.

A negotiator must recognize that emotions are an inherent part of the human condition; however, this does not mean they should exert absolute control over our decisions.

In high-stakes negotiations, where the margin for error is minimal, emotional detachment is an invaluable asset. The goal is not to suppress or deny emotions but to acknowledge them and manage their influence with prudence and timeliness. Balance is maintained by consciously separating emotions from the surrounding chaos.

Several tools can help transform negotiations from a purely transactional exchange to a collaborative dialogue in which mental clarity and strategy take precedence over impulsiveness.

2.1. Identifying emotional triggers. Psycholo-gical research has shown that each individual has emotional “buttons” that are activated by past experiences or deeply ingrained beliefs. These triggers can provoke disproportionate reactions to certain situations. Reflecting on past episodes where our reaction was disproportionate can help identify the root of these impulses and progressively diminish their impact.

2.2. Metamorphosis map. Creating a timeline of significant events provides a clear visualization of our personal evolution. This self-reflection tool helps us identify lessons learned over time and set milestones for future growth, strengthening both our identity and our decision-making confidence.

2.3. Detachment journal. Keeping a record of daily situations where emotional detachment would have been beneficial offers valuable insight into how emotions influence our decision-making. Noting the situation, our emotional response, and an alternative approach grounded in detachment helps us to cultivate a more strategic mindset, making us less prone to impulsive reactions.

3. Cognitive biases

Heightened emotions can easily lead negotiators to fall prey to cognitive biases. These biases, which stem from automatic thinking, hinder an objective understanding of facts and can compromise the success of a negotiation. To identify biases and mitigate their impact, it is essential to understand their nature and mechanisms.

Daniel Kahneman, recipient of the 2002 Nobel Prize in Economic Sciences for his contributions to behavioral economics and psychology, posits the existence of two systems of mental processing:

• System 1: Fast, intuitive, emotional, and automatic.
• System 2: Slow, deliberate, logical, and conscious.

Cognitive biases arise when System 1 responds without the analytical intervention of System 2, leading to automatic decisions that may result in flawed judgments. These biases often manifest in subtle ways but can have critical consequences.

• Availability bias. This occurs when people assess the likelihood of an event based on how easily they recall recent or striking instances. The human mind tends to give greater weight to vivid or emotionally impactful events, even when they are not statistically representative.

Case:  In a hostage negotiation, an inexperienced negotiator who has recently been exposed to a high-profile case in which a hostage-taking ended in tragedy overestimates the likelihood that the current situation will escalate into violence. Driven by fear, the negotiator hastily agrees to the hostage-taker’s demands without considering alternative strategies.

• Anchoring effect. This occurs when the first number or piece of information presented in a negotiation establishes a reference point that shapes all subsequent assessments, even if the initial value lacks a rational basis.

Case: A hostage-taker demands €1 million for the release of a hostage. An inexperienced negotiator is anchored to this disproportionate figure and bases their strategy on it without considering objective data. An experienced negotiator, on the other hand, understands that hostage-takers typically set initial demands well above what they are willing to accept and uses this knowledge to structure the negotiation in a more realistic way.

• Confirmation bias. This is the tendency of individuals to seek out and prioritize information that reinforces their preexisting beliefs, while dismissing data that contradicts those beliefs. This distortion can result in biased interpretations of reality and poorly founded decisions.

Case: A negotiator who firmly believes that hostage-takers never yield if they perceive weakness ignores subtle signs of fatigue or hesitation in the captor. By failing to recognize these opportunities for persuasion, the negotiator misses a strategic window for achieving a peaceful resolution.

• Illusion of validity. This occurs when a person overestimates the accuracy of their own predictions, even in the absence of solid evidence. Excessive confidence in personal judgment can result in poor decisions and unnecessary risks.

Case: A negotiator, convinced that they can anticipate a hostage-taker’s reactions without relying on historical data or behavioral analysis, misinterprets the situation and makes counterproductive decisions.

• Halo effect. This occurs when a positive or striking characteristic of a person is generalized to other areas, creating a biased overall perception.

Case: A hostage-taker who speaks politely and dresses neatly may be perceived as reasonable and less dangerous. This bias leads the negotiator to underestimate the actual threat that the hostage-taker poses, compromising the safety of the hostages.

• Optimism bias. This refers to the tendency to underestimate risks and overestimate our own abilities. In crisis situations, this bias can create a false sense of control and lead to inadequate preparation.

Case: A negotiator who is overconfident in their ability to persuade assumes that they can convince the hostage-taker without a structured plan. This overconfidence diminishes the effectiveness of the negotiator’s intervention and makes the situation more dangerous.

• Hindsight bias. Once the outcome of an event is known, people tend to perceive it as having been predictable from the outset. This cognitive distortion can influence how past decisions are assessed and foster a fatalistic perspective on circumstances.

Case: If a hostage negotiation ends in violence, some observers might say that the outcome was inevitable. However, this view does not take into account an analysis of factors that could have influenced the course of events.

• Representativeness bias. This bias involves estimating the likelihood of an event based on stereotypes or past patterns rather than relying on objective statistical data.

Case: A negotiator who assumes that a juvenile hostage-taker is less experienced and therefore easier to manipulate develops flawed strategies that underestimate the captor’s abilities.

• Loss aversion. People tend to fear potential losses more than they derive satisfaction from equivalent gains. This bias can result in hasty and disadvantageous decisions.

Case: A negotiator who, for fear of losing hostages, quickly agrees to the hostage-taker’s demands without considering the long-term consequences weakens their position and increases the likelihood of similar crises in the future.

• Illusion of control. This bias occurs when individuals overestimate their ability to control random events, leading to excessive confidence in their ability to influence outcomes.

Case: A negotiator who assumes that their personal skill alone can guarantee the success of the negotiation—without accounting for external factors such as the emotional state of the hostage-taker or police pressure—makes reckless decisions that jeopardize the operation.

Being aware of these biases and actively working to mitigate them can significantly improve the quality of our judgments and reduce the risks associated with rash or uninformed decisions.

4. From anxiety to confidence

Anxiety is defined as distress or uneasiness about what is about to happen or what we fear may occur. It is not merely inner turmoil but a force that reminds us of both our vulnerability and our ability to anticipate future events. Those who enter a negotiation in the grip of fear tend to underestimate their own power, make low initial offers, concede too quickly to others’ demands, and sometimes leave the negotiation table prematurely. As a result, their deals tend to be less advantageous. In terms of how it applies to executives, several studies reveal that anxious negotiators close deals that are, on average, 12% less financially attractive than those negotiated by individuals who approach the process from a neutral emotional state.

The perception of negotiation as an anxiety-inducing activity stems from three key psychological factors:

• Lack of control. Negotiation arises from the need to obtain something that cannot be achieved unilaterally. The sense that success depends on the will of others generates tension and unease.
• Unpredictability. It is impossible to predict with certainty how cooperative or aggressive the other party will be, or to anticipate their reactions and strategies with complete accuracy.
• Lack of clear feedback. Even after reaching an agreement, uncertainty lingers. Doubts about whether the best possible outcome was achieved, whether too many concessions were made, or whether excessive pressure was applied fuel insecurity and self-criticism.

However, anxiety is not inevitable. Effective strategies exist to instill confidence and enhance negotiation skills. There are three key ways to mitigate the impact of anxiety and strengthen a negotiator’s position.

• Preparation. A lack of information intensifies the inherent uncertainty of negotiations, adding to the negotiator’s psychological tension. Understanding the counterpart—their interests, constraints, and alternatives—is essential before entering a negotiation. Defining clear objectives reduces uncertainty and strengthens self-confidence. However, many people rely too much on intuition and overlook preparation, improvising and merely hoping for the best outcome. This phenomenon is known as the myth of natural talent: When someone exhibits strong conversational skills, it is often assumed that they possess exceptional innate intuition.

The most skilled negotiators prepare in advance but also cultivate the ability to improvise in a natural way.

However, research suggests that this strategy is not the most effective. The most skilled negotiators prepare in advance but also cultivate the ability to improvise in a natural way. What is often overlooked is the time they dedicate to refining their communication skills, the attentiveness with which they listen, the way they connect ideas, and their ongoing efforts to improve their skills.

Flexibility. Adaptability is a natural consequence of thorough preparation. A flexible negotiator adjusts their strategy without losing sight of core objectives, enabling them to respond intelligently to unexpected developments. Maintaining an openness to alternative solutions helps reduce anxiety and expands the possibilities for reaching satisfactory agreements.

Flexibility is not at odds with preparation; on the contrary, the more prepared a negotiator is, the greater their confidence and ability to improvise effectively. A well-prepared negotiator does not rigidly adhere to a plan but instead adapts to circumstances without losing sight of the goal.

Practice. Anxiety thrives on the unknown. Regular exposure to negotiation scenarios reduces the emotional impact of engaging in this process, making it more familiar and manageable. In psychology, exposure therapy is used to treat phobias because repeated exposure to the situations that cause fear helps to reduce this feeling. Similarly, the more we negotiate, the more comfortable and confident we become.

Practical experience is one of the most effective ways to internalize learning. In education, the gap between knowledge and action—often referred to as the “knowing-doing gap”—is widely discussed: Understanding something intellectually is only the first step.

5. From anger to calmness

Anger, like anxiety, is an inherently human emotion—an expression of our survival instinct that, in its original form, helped us confront threats and adversity. However, while anxiety stems from fear of the future and personal uncertainty, anger is directed at our counterpart, creating a barrier that impedes understanding and communication. It is an expansive emotion that, when unchecked, clouds our judgment and fuels a vicious cycle of blame, defensiveness, and confrontation. Often, those who experience anger justify their outburst as a legitimate response to provocation, unaware that their own reaction fuels the escalation of the conflict.

In negotiations, anger often distorts our perception of reality, leading to a combative approach that reflects the so-called fixed-pie bias. This bias stems from the mistaken belief that any gain for the counterpart translates into a direct loss for us, reinforcing a zero-sum mindset that hinders productive dialogue. In addition to making collaboration difficult, anger leads to impulsive and often self-defeating decisions. It is no coincidence that people are more likely to lie to an angry opponent than to a calm one. Anger dehumanizes the other, leading us to reduce them to a mere threat rather than recognizing them as individuals with legitimate aspirations.

When we recognize that we have the capacity to voluntarily free ourselves from anger, we make a conscious decision to abandon self-pity and emotional stagnation. This does not mean ignoring perceived injustices or relinquishing our position in a negotiation, but rather understanding that anger is not a fixed state—it is a choice.

6. Handling the counterpart

In high-stakes negotiations, beyond irrational behavior, the captor or hostage-taker is often in a state of extreme impulsivity. They are like a reckless boxer throwing rapid, chaotic punches—not to land a blow, but to disorient, create turmoil in the dialogue, and erode the negotiator’s mental clarity. The first question is: How do we break through this wall of hostility and desperation? And the answer to that question is to offer security. In a state of unconscious vulnerability, people crave stability and certainty. However, offering security requires more than words and active listening; it demands mastery of strategic tools that, when applied effectively, can play a pivotal role.

Roger Fisher and Daniel Shapiro outlined five emotional concerns that influence negotiations and can serve as key tools for managing an emotionally agitated counterpart:

Appreciation. Everyone wants to feel that their thoughts and actions are acknowledged and valued. In addition to strengthening cooperation, appreciation reduces resistance and distrust. In a hostage situation, for instance, a negotiator who acknowledges the hostage taker’s suffering or desperation creates an avenue for empathy that can help ease initial tension.

Affiliation. Rather than confronting the other party, a negotiator can build connections that foster a sense of belonging. This approach is often observed in police negotiations, where officers, rather than making threats, emphasize shared experiences or common ground with the hostage-taker to reduce their perception of hostility.

Autonomy. Respecting the other party’s decision-making ability is crucial. Imposing a solution often triggers resistance and hostility. In a negotiation with an armed robber, for example, allowing them to make controlled choices—such as deciding whom they want to speak with or whether they receive food—reinforces their sense of control and helps prevent escalation to violence.

Status. Recognizing each person’s role in the negotiation is essential. If a negotiator disregards the other party’s need for recognition, the latter may react with disdain or defiance.

Role. When a counterpart feels that their role is being ignored or minimized, negotiations become even more complicated. A clear example is when a hostage-taker acts as a group spokesperson. Instead of discrediting them, the negotiator allows them to express themselves in that capacity, reinforcing their sense of significance. This, in turn, makes the individual more receptive to proposed resolutions.

Being aware of these emotional concerns and creating a more favorable terrain for negotiation lays the groundwork for the following:

Identifying the counterpart’s dominant emotions. Recognizing our counterpart’s emotional baseline—whether they are prone to anxiety, anger, or fear—helps us anticipate the thresholds beyond which they will react irrationally and avoid triggers that could escalate the crisis. Establishing this reference point also helps us avoid actions that may be contrary to their interests, needs, and goals. It is not uncommon to see individuals make decisions that clearly work against their own interests, raising the question of why they fail to recognize this.

Emotional payments. These symbolic concessions do not necessarily require giving up anything tangible; rather, they involve offering elements that provide reassurance and gradually guide our counterpart toward a more rational state. When a hostage-taker demands justice for a personal cause, giving them the opportunity to be heard—whether through the media or by a figure of authority—can be a turning point that allows the negotiation to move toward a peaceful resolution.

Reflection: the first victory

From a personal perspective, what truly influences a negotiation is the struggle between instinct and reason, between the visceral nature of emotion and the lucidity of thought. The first victory lies in not allowing ourselves to be overwhelmed by internal noise that amplifies the noise around us. If we become paralyzed by fear of what might happen, we will be unable to do anything sensible. A skilled negotiator does not blindly push forward but stays grounded in self-awareness and reflection. Each day is an opportunity to learn, adapt, and refine our approach.

About the Authors

Prof. Guido Stein – Professor of Managing People in Organizations and Director of the Negotiation Unit at IESE. PhD in Philosophy (Management), MBA from IESE. Partner at Inicia Corporate, specialized in M&A and Corporate Finance.

Salva Badillo – Professional negotiator in crisis situations. Certified HERMIONE® trainer in High-Intensity Negotiation. Director of The Trusted Agency in Spain, Latin America, and Eastern Europe.
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Lucía Zelaya – Bachelor’s in business administration and MSc in Big Data Science from the University of Navarra. Researcher in Managing People in Organizations Department at IESE Business School.

The post Feel to Deal: The Power of Emotions in Negotiations appeared first on The European Business Review.

By Dr. Claudio Antonini and Dr. Kamil Mizgier

When it comes to building models for the purpose of forecasting, system designers are naturally concerned that their models should be accurate. There is, however, another system characteristic that is of equal, if not greater, importance—its resilience.

In discussions about forecasting, it might serve well to remember its mother ship, the field of control theory. In this field, the objective is to control a system, sometimes called a “plant,” which might be, for example, a robotic arm, a submarine depth system, or the telescope camera of an interplanetary probe. To control these systems, actions must be implemented and, conceptually, they can be grouped into two processes that work in unison: one process that commands the plant, and another that estimates the variables on which the control is based. Let us consider an airplane. If the objective is to maintain course at a certain speed and altitude, the control part would be exercised by the combined actions of a turbine and a few control surfaces (ailerons, rudder), and the variables to be estimated will be the airspeed, attitude, and altitude, among others. In an economic system, the commands may be taxation, interest rates, or import restrictions, and the estimates may be the level of employment, the rate of inflation rate, or the currency exchange rate.

Forecasters today apply techniques almost exclusively in the time domain.

Whatever the specific variables controlled or estimated, overall, the fundamental and critical feature that allows a system to follow commands—to be controlled—is feedback. This mode of working, when feedback is implemented, is called “closed-loop.” Conversely, without feedback, the system would be labeled “open-loop.” Summarizing—no feedback, no control.

Compared to open-loop systems, feedback helps in (a) reducing the effect of modeling error and external disturbances, (b) changing, if necessary, the whole system stability, and (c) improving accuracy, that is, the “distance” to a desired set point. In the case of an airplane, if feedback is broken for some reason, the airplane would not be able to use the estimated (also called, forecasted) variables and would not be able to be controlled. Effectively, the airplane would be unable to maintain its required speed and altitude. The nightmare of a control engineer is an open-loop, uncontrolled system.

The arrangement of dividing control into two processes, control itself and estimation (also known as “filtering” or “forecasting”, depending on the author and disciplines), is well illustrated in a seminal book, Time Series Analysis: Forecasting and Control by George Box and Gwilym Jenkins¹. A testament to the importance of the book is that it has seen five editions since its first, in 1970. In this work, Box and Jenkins consider time- and frequency-domain techniques to analyze systems described by their time series, stressing time and again that the most important characteristic of a control system is its stability. However, nowadays, Box and Jenkins is rarely, if ever, quoted in forecasting literature. Forecasters are focused on other performance parameters of the system and may not be aware of the possibility of controlling it to get even better performance.

Most likely, practitioners ignore feedback due to their restricted focus, not paying attention to topics that Box and Jenkins discussed over various editions of their book. Forecasters today apply techniques almost exclusively in the time domain (except for some work with FFTs), do not consider transfer functions, have not heard of poles or zeros, and do not have ways of measuring the system’s stability. Effectively, forecasting is working in an open-loop architecture and, for that reason, practitioners are so concerned with “accuracy,” something that, in a closed-loop system, is of secondary concern when compared to the primary importance in that field, stability.

Several studies have been published that aim to model closed-loop systems, particularly in areas such as economics² and supply chain management³. We illustrate this concept by running a small program to simulate supply and demand for a hypothetical demand-planning exercise. In this model, we simulate the output (or quantity produced) based on demand and observe how closing the feedback loop affects the accuracy of our predictions. In the first model run, the simulation assumes that demand grows linearly (figure 1). In the second run, we enhance the model by introducing randomness to demand (figure 2). The no-feedback model simply uses the demand from the previous two samples to predict how it will grow in the next sample. The formula output_no_feedback[t]=output_no_feedback [t-1]+(demand[t-1]-demand[t-2]) represents a very simple linear demand forecasting model.

In comparison, the feedback model adjusts predictions by applying a correction factor based on how far the actual output (output_with_feedback[t-1]) deviated from the demand in the previous sample (demand[t-1]), effectively closing the loop.  To state this as a formula, output_with_feedback[t]=output_with_feedback[t-1]+feedback_factor*(output_with_feedback[t-1]-demand[t-1])

The results of the simulations with feedback and without it are shown in figures 1 (demand grows linearly) and 2 (random demand).

In both cases, we see a solid improvement in terms of accuracy (getting closer to the demand) even when that was not a design objective.

Social systems are more difficult to model than physical systems, which follow well-known laws.

The large improvement in accuracy is attributed to using a new structure for minimizing the error. This is a profound difference with articles that analyze alternative methods to improve accuracy where different methods for forecasting are employed but always keeping the same open-loop structure. In this case, we are closing the loop, departing significantly from minimal changes in algorithms that keep the same open-loop structure.

But … why do forecasters ignore feedback?

Most probably, forecasting practitioners deal with types of systems in which they cannot model the feedback process and, thus, “what one cannot model one cannot control.” These are possible reasons:

• Social systems are more difficult to model than physical systems, which follow well-known laws
• Events in social systems are single-case experiments; rarely can they be repeated
• Even if they were successfully modeled, humans would try to exploit loopholes and react in ways that were not considered during the modeling phase (the Lucas principle in economics)
• There may be a belief that forecasting demand (although useful in itself) is a substitute (in terms of performance) to having a model for the feedback process

In addition to the fuzziness of the social systems that forecasters must deal with, in social environments the time scales are orders of magnitude slower than those in physical systems. In the case of an airplane’s autopilot, typically, the signals that are used to estimate aileron or rudder positions and turbine parameters are sampled every few milliseconds. Thus, humans may not be able to control the airplane in real time (particularly if they are naturally unstable airframes) and the control has to be automated. On the other hand, forecasting sales in a supermarket may be done with monthly data or, in macroeconomic systems, with quarterly data. The fact that data in these cases is available so infrequently may give humans the idea that they have ample time to make decisions and affect the outcomes of their system (for example, sales, output in a GDP, or unemployment) in a desired direction. To that effect, they indeed take action, but without the rigor of a control engineer, who makes a significant effort in modeling the system to be controlled and simulating various techniques to get the desired outcomes.

Whether by choice (relying on modeling demand and ignoring the modeling of the feedback decision process), necessity (social systems difficult to model or data available too infrequently), or lack of familiarity with modeling techniques (relying on crude and simple regressions instead of more dynamic approaches), and confronted with systems that behave under their own open-loop dynamics, forecasters have no other possibility than measuring how far they are from an intended target. That is, they have no other possibility than to keep developing and using “accuracy” indicators, much as a man walking down the middle of the street decides that he’s doing well if he hits the curb in 3 minutes of walking blind, rather than in 1 minute.

Comparing feedback and no-feedback prediction models, it becomes evident that human-controlled systems often fail to achieve optimal performance as compared to airplanes and other engineered systems. Systems overwhelmed by an exploding amount of information and indicators can exacerbate problems rather than resolve them. Such control relies heavily on noisy, incomplete, or misleading data, which can result in decisions that reduce performance.

The key takeaway is that resilience should be a design concern in the event of performance degradation. Systems that prioritize adaptability and robustness—while acknowledging the limits of prediction—are better equipped to deal with uncertainty and mitigate risks. For example, flood prediction systems in Europe failed numerous times in 2024, highlighting the dangers of relying too heavily on inaccurate weather forecasts without building sufficient resilience into the system. Needless to say, in cases where feedback modeling could be implemented, ignoring it would be a risky—if not negligent—strategy.

About the Authors

Dr. Claudio Antonini, MIT nuclear safety engineer, after working in the design of GNC systems for missiles and drones, has applied that numerical experience in the field of finance for the last 25 years. Working at UBS, he developed the largest global implementation of a genetic algorithm for banking, and has continued to apply data mining, machine learning, and artificial intelligence algorithms for risk management, in consultancies (Deloitte, AlixPartners) and the Bank of New York Mellon. He publishes consistently on forecasting topics.

Dr. Kamil Mizgier brings his extensive practical experience and deep knowledge to explore challenges in strategic risk management. By leveraging his 15 years of expertise from key roles, including Global Supplier Relationship and Risk Management Leader at Dow and risk modeling leadership positions at BNY Mellon and UBS, he delves into the latest trends, tools, and techniques in risk management, offering invaluable perspectives that bridge academic rigor and practical application.

References

1. Box, G. et al. 2015. Time Series Analysis: Forecasting and Control 5^th Edition, John Wiley and Sons Inc., Hoboken, New Jersey.

2. Carranza, R. G. 2016. “The Closed Loop Economy.” International Journal of Design & Nature and Ecodynamics, 11(4), pp. 600-9.

3. MahmoumGonbadi, A. et al. 2021. “Closed-loop supply chain design for the transition towards a circular economy: A systematic literature review of methods, applications and current gaps.” Journal of Cleaner Production, 323 : 129101.

The post Why Forecasting is Fixated with Accuracy: The Risk of Ignoring Feedback appeared first on The European Business Review.

By Dr Anthony Renshaw 

The ongoing permacrisis has amplified burnout risks, especially for crisis management teams under immense pressure. This article highlights their challenges and offers strategies to mitigate fatigue, including clear roles, training and mental health support. Proactively addressing burnout is vital for resilience, safeguarding employees, and navigating today’s unpredictable risk landscape.

Navigating the Era of Permacrisis 

Since the onset of the COVID-19 pandemic in December 2019, a series of global crises have impacted an already fragmented risk landscape, making employee burnout a pressing concern for organisations worldwide. The growing frequency and intensity of crises, driven by escalating geopolitical tensions, cyber threats, climate change, and other challenges has fostered a state of permacrisis leaving little opportunity for recovery. 

This persistent wave of disruptions has heightened the risk of crisis fatigue and its fallout, particularly for teams responsible for helping their organisations to manage crisis events. To navigate these challenges, organisations must adopt proactive strategies to support their crisis management teams and mitigate the risks of burnout across their organisations. 

Understanding the Burnout Epidemic 

Modern crises are becoming more complex and frequent, requiring multifaceted responses that strain existing resources as employees often find themselves juggling multiple roles and responsibilities, working extended hours, and struggling to maintain a balance between professional and personal life. Such factors contribute significantly to the escalating challenge of burnout, as highlighted by the International SOS Risk Outlook Report 2025, which found that 78% of senior risk professionals believe burnout and stress will significantly impact their business and/or people in the coming year. 

Crisis Management Teams: The Frontline Burden 

While burnout impacts employees across the board, crisis management teams are particularly vulnerable. These teams operate under intense pressure, tasked with conducting risk assessments, managing communications, and making high-stakes decisions within accelerated timelines. The need for constant vigilance and rapid adaptation can quickly lead to fatigue, diminishing team morale and motivation. Human Resources (HR) professionals also shoulder a heavy burden during crises. Responsible for managing the human aspects of organisational resilience, they play a pivotal role in supporting employees through tumultuous times. This dual responsibility of addressing individual needs while maintaining overall organisational stability places HR personnel at a heightened risk of burnout. 

Strategies for Supporting Crisis Management Teams 

In our experience supporting countless crisis management teams across multiple industries, organisations can counter the effects of burnout and support the resilience of crisis management teams through several tailored strategies. Adaptive leadership techniques are one technique¹; however, its nuances are by their nature fluid and hard to define for some. Our hypothesis is that a number of simple recommendations can help counter the impact of crisis fatigue on leadership teams. 

1. Defining Clear Roles and Escalation Processes 

Establishing well-defined roles and escalation protocols is fundamental to the success of crisis management teams. When responsibilities are clearly outlined, teams can operate more efficiently, reducing the cognitive load on individuals and mitigating potential challenges otherwise faced. The crisis team does not need to be hierarchical. But needs to know where to go to validate its findings. In one successful pandemic crisis team International SOS supported, the crisis manager had been appointed based on demonstrated significant prior experience in managing crises and coordinating stakeholders, not on his formal position within the leadership team. Empowering the team to make decisions based on evidence and guidance helps to alleviate tension. Clear escalation processes also ensure that critical decisions are made at appropriate levels, alleviating undue pressure on frontline personnel. 

2. Providing Regular Training 

Continuous training is essential to enhance decision-making under pressure. By regularly updating crisis management protocols and conducting realistic simulations teams can build confidence and familiarity with response procedures². Such preparedness not only improves operational efficiency but also fosters a sense of control and competence, mitigating potential stress, anxiety and burnout risk³. 

3. Allocating Adequate Resources 

Ensuring the availability of sufficient resources is a cornerstone of preventing burnout and maintaining high performance as crisis management teams require not only the right tools and infrastructure but also adequate staffing to manage workloads effectively. Access to advice on how the crisis may play out or where epidemiological trends are going can help crisis leaders make decisions more rapidly and ease the cognitive overload. Flexible staffing models, such as rotating personnel or creating surge capacity teams, allow employees to recharge and prevent exhaustion during extended crises.  

Allocating additional resources for professional development, equipment, and team support enhances overall efficiency and morale. By prioritising these investments, organisations demonstrate a commitment to their teams’ well-being and resilience, which in turn strengthens their capacity to manage crises. 

4. Integrating Mental Health Support 

Mental health support should be embedded into every stage of crisis management. Providing employees with access to counselling, stress management programs, and resilience-building workshops can significantly enhance their ability to cope with high-pressure environments. Equally important is fostering a culture where seeking mental health support is seen as a strength, not a weakness through normalising open conversations about mental health and addressing stigma create an environment where individuals feel supported and valued. Proactive engagement with mental health resources ensures that teams remain mentally strong and equipped to navigate prolonged challenges. In our experience having a clinician advising or as part of a health crisis management team can help provide welcome support.  

5. Leveraging Technology and Innovation 

The integration of advanced technologies can significantly enhance crisis management capabilities while reducing stress on personnel. Real-time data analytics and virtual collaboration tools enable seamless communication and information sharing among geographically dispersed teams. These technologies streamline operations, improve decision-making, and provide data-driven insights critical for navigating complex crises. 

Conclusion: Turning Challenges into Opportunities 

The ongoing permacrisis environment presents unprecedented challenges, but it also offers opportunities for organisations to strengthen their crisis management capabilities⁴. By prioritising the wellbeing of their teams, investing in preparedness, and leveraging innovative technologies, organisations can navigate crises more effectively while safeguarding the mental and physical health of their employees. As 64% of Risk Outlook 2025 survey respondents highlight increasing employee expectations regarding Duty of Care, organisations must embed proactive health, safety, and security measures into operations to address current and emerging risks. By doing so, businesses can transform challenges into opportunities, ensuring resilience and success in an unpredictable world. 

Addressing burnout is not just a moral imperative but a strategic necessity. Today’s interconnected risks require a move from reactive to predictive strategies meaning organisations must harness intelligence-driven insights and foster cross-functional collaboration to manage these multi layered risks. This systematic approach not only safeguards people and operations but also builds resilience in an era of unpredictability.

About the Author

Dr Anthony Renshaw, Regional Medical Director at International SOS, is a medical expert who has held multiple roles at the organisation, overseeing medical services, health consulting, and remote health solutions across Asia-Pacific and beyond. A former NHS surgeon, he advises Fortune 500 firms, governments, and NGOs. He holds degrees in immunology, oncology, and plastic and reconstructive surgery, a doctorate from UCL, and an INSEAD MBA. 

References 

1. Heifetz, R., Grashow, A., & Linsky, M. (2009). Leadership in a (Permanent) Crisis. Harvard Business Press.

2. Porot, G., & Tutte, M. (2023). Adaptive and Effective Crisis Management Programme. International SOS Webinar.

3. Porot, G. (2023). What are the Three Stages of Crisis Management? International SOS.

4. Porot, G. (2023). Companies Must Accept the Existence of Murphy’s Law. IMD Business School.

The post Supporting Crisis Teams and Countering Burnout: A Strategic Essential   appeared first on The European Business Review.

As businesses navigate market disruptions, technological innovations and an increasingly turbulent world, leaders will frequently find themselves taking control of a team in the aftermath of a crisis. Inheriting such a challenging environment often means facing frustrated employees, expectant customers, and senior teams all crying out for rapid improvement.  

But the process is not as clear-cut as simply making changes and heading off into the sunset. Succeeding as a turnaround leader requires a different mindset and approach compared to typical management styles. It demands a balance of decisiveness and conscientiousness, underpinned by strategic thinking abilities. Without these, leaders can find themselves creating a worse situation than the one they originally entered.  

Here are some basic principles to help you thrive if you find yourself in this situation as a new manager.  

Get crystal clear on what went wrong  

Rigorously assessing the previous scenario and its mistakes is an important first step in developing a strategy and preventing further crises. Structured problem-solving plays a key role here, as it ensures that decisions and diagnoses are based on a thorough understanding of the problem, not just on gut feelings or superficial assessments. 

Start by clearly identifying the main issues at play, breaking the situation into manageable parts to discover the root causes. Drive your analysis using frameworks like stakeholder analysis, SWOT assessments and scenario planning. Likewise, develop criteria for evaluating potential solutions, ensuring they align with your organisation’s strategic goals. 

Other strategic thinking skills like mental agility are also beneficial here. Learning how to think flexibly and adapt to changing circumstances helps you pivot quickly when faced with unexpected challenges. To cultivate this skill, practice brainstorming and lateral thinking techniques. Playing logic-based games can also be an easy way to introduce this way of thinking into your daily routines.  

Sell your vision for change 

The team you’ve inherited will also feel the weight of the situation and may have lost trust in management’s ability to fix it. As a leader, it’s your job to win them back onside. Doing so requires an inspiring, shared vision outlining how you will get out – and stay out – of trouble.  

Effective visions provide stakeholders with an understanding of how an organisation will appear once it has achieved its mission, considering its priorities and strategies. However, simply imagining this idealised future is not sufficient; you must rally people behind it. This requires leaders who can bridge the gap between ambitions and the current reality within the organisation and promote the process. 

Practice your storytelling with trusted colleagues, trialling how you’ll present your vision persuasively to different audiences. Pick out key elements that will appeal to certain groups. Alongside your communications, let your actions do the talking. Allocating the right people and holding them accountable for achieving the various targets and stages of your vision shows that you are serious about making improvements. 

Prioritise transparency 

After a crisis, there will be trade-offs and hard choices to make. Hiding from these will make it worse for everyone involved. To gain support and momentum, prioritise transparency when discussing the situation with your team.  

Acknowledge the impact that any changes may have on priorities and workload going forward, explaining the rationale behind the decisions you’re making and how this could affect their day-to-day work. Ensure you regularly check in with those affected to address their concerns, provide updates, and manage expectations. Answer the questions that are being asked instead of the ones you want to speak on. But remember, your message should be consistent with the vision you’re working to achieve.  

Taking the time to recognise your team and celebrate every win can also be a great way to build and sustain momentum.  

Be politically savvy 

In a turnaround, you must be adept at building the best connections to drive your strategic agenda forward. By cultivating political savvy – the ability to influence others and capitalise on the power dynamics at play in any organisation – you can build alliances, negotiate and navigate conflicts more effectively. 

Begin by identifying the stakeholders you need to mobilise behind your vision and who recognise the need for change. Learn about their internal power structures, interests, and motivations. In doing so, you can avoid strategic missteps and internal resistance. 

Leaders are often time-poor so having a strong coalition of supporters to spread your message can be far more effective than simply relying on one person’s voice. Learn who best to lean on for certain initiatives and leverage these relationships to drive your objectives and vision forward.  

By implementing these strategies, you can maximise efficiency as a leader while supporting your remaining team members through these challenging times.

About the Author

Michael Watkins is a professor of leadership at the IMD Business School, co-founder of Genesis Advisers, and a bestselling business author of books including The Six Disciplines of Strategic Thinking and The First 90 Days.  

The post How to Lead if You Inherit a Bad Situation  appeared first on The European Business Review.

By Nathan Bennett, G. James Lemoine, and Péter Molnár

AI-enabled volatility, uncertainty, complexity, and ambiguity (VUCA) are downsides to the numerous benefits of AI technology. Understanding them will help business leaders to adopt governance methods that enable better decision-making while remaining aware of its limitations.

Executive Summary

In this article, we describe the way AI addresses decision-making challenges related to volatility, uncertainty, complexity, and ambiguity (VUCA) and also introduces new risks. Examples include AI-induced market volatility, uncertainty from deepfake technologies, and challenges in integrating AI with business operations. We emphasize the importance of AI governance and model controls, as AI tools will undoubtedly create new VUCA challenges if not carefully managed. Leaders are cautioned to be aware of AI’s potential to cause false confidence or chaos, and the need for deliberate implementation and vigilant oversight to prevent AI from exacerbating VUCA challenges instead of solving them.

Volatility, uncertainty, complexity, and ambiguity (VUCA) are terms used to describe vexing decision-making environments for leaders. AI’s ability to quickly process and learn from vast amounts of data shows promise for improving decision outcomes in the face of VUCA challenges. Of course, there are cautionary tales illustrating how AI has led decision-makers astray. Amazon’s AI recruiting tool showed bias toward male candidates, and Tesla’s AI-driven systems have faced scrutiny over automobile accidents. AI-powered facial recognition technology has been found to misidentify people of color at higher rates than whites. Recently, the misuse of AI for deepfake identity theft has highlighted a new area for abuse.

Because such examples are so stunningly worrisome, obviously produce errors, or a combination of the two, we expect leaders will be especially attentive to preventing similar issues from emerging in future AI deployments. However, decision-makers must understand the problems inherent in less obvious features of AI tools’ development and deployment. While an AI implementation may address the specific elements of VUCA it was programmed to consider, it also brings new and unanticipated VUCA-related challenges. In other words, the design and implementation of AI tools often come with VUCA “baked in.” Managers must be mindful of these potential issues as they integrate AI into their decision-making processes. However, as one AI executive told us, “From what I have seen, companies invest in AI before they invest in AI governance and model controls. The former without the latter is dangerous.”  Because AI can create VUCA and a rush to adopt AI may occur without sufficient guardrails, it underscores the need for leaders to be aware of AI’s potential to create false comfort or chaos.

AI Creates Volatility

While an AI implementation may address the specific elements of VUCA it was programmed to consider, it also brings new and unanticipated VUCA-related challenges.

There are several demonstrations of volatility introduced to decision-making by AI. Most notably, AI is used extensively in high-frequency trading (HFT), where algorithms make rapid trades based on complex data analysis. Some critics argue that HFT algorithms cause sudden price swings, making markets more volatile. Though AI systems constantly learn and evolve, unexpected changes can lead to unintended consequences. For instance, an AI used for dynamic pricing might misinterpret a sudden surge in demand and set an excessively high price point, potentially leading to a sales slump (or, as Wendy’s hamburger chain recently learned, spark a volatile customer reaction by its mere existence). As another example, biased training data can lead AI to make unfair or discriminatory recommendations. For instance, AI used in the hiring process might favor candidates with specific resume keywords, unintentionally filtering out qualified applicants from diverse backgrounds. A decision-maker relying on such an AI system could make biased hiring choices, leading to potentially volatile consequences like lawsuits or reputational damage.

AI Creates Uncertainty

Several examples of AI’s capacity to build uncertainty have recently made the news. First and perhaps most dramatically, as Warren Buffet noted at the 2024 Berkshire Hathaway shareholder meeting, the ease with which a bad actor can create deep fakes of audio and video content quickly destroys trust in the integrity of anything we hear or see. A recent Washington Post article made it clear that much of the content on social media sites like 4chan results from nefarious efforts to use AI to create false content. Less dramatically, but just as vexing is the uncertainty AI introduces through evolving regulations. The EU’s AI Act, passed in May 2024, is the world’s first comprehensive AI law, and more regulations are expected to follow. This regulatory landscape creates uncertainty about AI’s design, implementation, and liability.

Next, intellectual property issues in AI-generated content add to this uncertainty. This issue was at the core of the Writers Guild strike that shut down Hollywood in the summer of 2023. As AI systems become more capable of composing music, crafting visual art, and writing stories and scripts, questions will arise about who owns the rights. Of course, issues should also be expected to arise regarding the infringement by AI on existing intellectual property rights. Establishing clear legal frameworks to address ownership and rights related to AI-generated content is crucial but presents challenges due to the unique nature of AI’s creative processes. Leaders must navigate these uncertainties while considering AI’s implications for their industries and workforce.

As AI systems become more capable of composing music, crafting visual art, and writing stories and scripts, questions will arise about who owns the rights.

Finally, AI is seeding uncertainty among workforces around the world. At M&T Bank, Chief Data Officer Andrew Foster recognized the rise of generative AI as “a headline-grabbing beast”, and understood employees were unclear about the impact AI might have on their jobs and career security. To address this, the company hosted an “AI Week”, in which nearly one thousand employees (a majority of whom did not work in a technology-related job) came together to discuss AI’s implications for the bank and AI ethics and data privacy. During AI Week, company executives worked to address this uncertainty by describing how they are tying AI to their three ‘pillars’ of work at M&T: Policy, including the expectations and ethical guardrails; Education, including how AI will be used to upskill opportunities; and Opportunity Seeking, explaining how AI can make a positive difference for the organization.

AI Creates Complexity

The inherent complexity of emerging AI technologies poses significant challenges. Practically, integrating AI solutions with existing business operations can be daunting. For example, an accurate demand forecasting model might be difficult to incorporate into an organization’s ERP system, and the availability of historical data may present ethical, financial, and regulatory challenges when training algorithms. Regulators face complexity balancing industry pressures, developer concerns, and public safety. Effective implementation of AI requires overcoming these hurdles. The legal and regulatory uncertainties mentioned above – and the work required to establish compliance – will undoubtedly be an ongoing and complex challenge for leaders. Ethical issues are complex, too. For example, how AI systems learn to prioritize certain patients over others in the medical context raises questions about fairness and justice. Training AI tools to share the values espoused by an organization’s mission and vision is delicate and complex.

AI Creates Ambiguity

Decision-based AI models often output solutions without explanations, leaving managers to guess why a seemingly obscure or obtuse suggestion might be best.

AI algorithms often operate as ‘black boxes’, challenging understanding and communicating the assumptions or rationale behind their results. Decision-based AI models often output solutions without explanations, leaving managers to guess why a seemingly obscure or obtuse suggestion might be best. This ambiguity can lead decision-makers to fill in gaps with their interpretations, which vary based on individual experiences and biases. Without a shared understanding of AI-generated results, leaders may hesitate to act on them. It is troubling when executives like Delta CEO Ed Bastian are on record noting that data integrity issues might lead AI to hallucinate. A hallucination is quite vividly understood as a foundation for ambiguity. As another AI veteran opined, “AI is such a good liar that even though we know it produces hallucinations, we still think we can trust it.”

Conclusion

AI does offer significant potential to address the challenges faced by decision-makers confronting VUCA. However, it also introduces new and often subtle layers to these challenges. Leaders must recognize AI’s potential to enhance decision-making while remaining vigilant about its limitations and the new unintended risks inherent in its adoption. AI tools can create VUCA as surely as they can address it. Absent deliberate consideration, careful implementation, and vigilant oversight, there is a risk that what was intended as a salve for decision-makers confronting VUCA instead becomes its catalyst. Several executives shared this caution with us, including one who succinctly said, “I am not hearing enough conversation about these threats to trusting AI-generated recommendations.”

About the Authors

Nate Bennett is a Professor at Georgia State’s Robinson College of Business in Atlanta, Georgia. He has published in Harvard Business Review and Wall Street Journal, as well as in several top academic journals. He is co-author of Riding Shotgun: The Role of the COO, published by Stanford University.

James Lemoine is currently an associate professor of organizations and human resources at the University at Buffalo (SUNY) School of Management. His research on the intersection of leadership, ethics, and creativity has been published in top academic journals and covered by top business news outlets such as Harvard Business Review.

Péter Molnár is an associate professor at Georgia State University’s J. Mack Robinson College of Business where he teaches artificial intelligence, focusing on both technical implementation and executive decision-making. His career bridges academia and industry, including work as a data scientist at Amazon Web Services on innovative machine learning applications.

The post AI-Enabled VUCA appeared first on The European Business Review.

By Adrian Furnham

Many believe that the young generation is not interested in working, with some calling them the Lazy Generation. The concept of the Great Resignation seems to corroborate this claim. Is this really true or are young people pickier about the quality of jobs and their prevailing conditions?

This is a relatively new concept. It has also been known as the Big or Quiet Quit or even the Great Reshuffle. It is associated with the idea that over the last five years, large numbers of people in Western countries have resigned from their jobs. It is a unique, sustained, and very worrying mass exodus of, typically, young people from their (mainly full-time) jobs. Some call it a general strike. It is primarily the Millennials and Generation Z who resign.

It has been particularly noticeable over the COVID-19 period and associated with poor national economic performance, with a simultaneous rise in the cost of living, wage stagnation and slow economic growth. The demographers suggest that it is mainly younger and less skilled workers in low-wage sectors such as education, healthcare, retail and service industries that are doing this, partly as a reaction to new working conditions dictated by changes in technology. It is suggested that as many as 2/3 of young people in the workplace were looking for new jobs in the past 5 years.

Many have asserted that workers, particularly young people, are very dissatisfied at work through a combination of factors such as deskilling, poor career advancement, a hostile work environment (bosses, customers and peers), inflexible and often non-remote work requirements and policies, reduced benefits and overall disenchantment. In short, an unexpected and sizeable number of people have resigned from their jobs, though how many, and why remains debatable.

Decent work provides an opportunity for skill use and development, social contact and having a valued social position.

Certainly, the pandemic encouraged many people to re-evaluate their jobs. This was greatly influenced by remote working requirements, which found many debating their work-life balance. Everybody wants more money, flexibility and meaning in their jobs, as well as less stress, but these issues have recently come to a head.

There are, of course, questions of why this has occurred. Was it a short-term blip associated with other political and economic events (e.g. Brexit) or is it a trend? Were people in this period laid off in higher numbers, or was it because they quit their jobs? Has it simply petered out, or is there an underlying trend in areas where automation, AI and robotics deskilled jobs?

Is it primarily due to new technology, new working conditions, an economic downturn, or a major change in the attitudes to work? Has it led organisations to provide better working conditions to attract and keep their employees?

What it has done is highlight two psychological issues: what is a good (decent, fulfilling, stimulating) job? And second, are there important generation differences in attitudes to work?

Decent Work

Decent work has well-known psychological benefits. Decent work provides an opportunity for skill use and development, social contact and having a valued social position. It gives a sense of collective purpose, social status and money (Agency). Psychologists have long documented the psychological benefits of good work. Freud said there were only two basic requirements for happiness: Lieben und Arbeit (Love and Work).

In a review paper, Aitken et al (2023) describe the psychological benefits of work: Time structure (The degree to which individuals perceive their use of time to be structured and purposive); Collective purpose (The degree to which individuals perceive their lives to be purposeful in relation to a greater collective); Social contact (The degree to which individuals are socially engaged beyond their own family); Social status (The degree to which individuals perceive their social identity as higher or lower in relation to their employment status) and Enforced activity (The degree to which individuals are able to sustain regular activity as a function of their employment status).

This is not to deny the importance of a decent, living wage, but we have known for a long time about the psychological factors at work that lead to good jobs. There are clear benefits of all jobs, but better jobs have more of them.

• Work structures time. Work structures the day, the week and even longer periods. A predictable pattern of work, with well-planned “rhythms”, is what most people seek. If you are a morning person and choose to work in the morning, all the better. Even on holiday, people can discover the benefits of the regularity of activities that work brings. Shift work is often very problematic.
• Work provides regularly shared experiences. Regular contact with co-workers provides an important source of social interaction. Often, it is a primary source of friends of all types. Working with people of your own age and stage, values and passions is enormously satisfying. Likewise, being deprived of these social opportunities is significant.
• Work provides the experience of creativity, mastery, and a sense of purpose. Work, even not particularly satisfying work, gives some sense of mastery or achievement. Creative activities stimulate people and provide a sense of satisfaction. Some jobs offer this more than others. The more you can learn, show your skills and make a contribution, the better.
• Work is a source of personal status and identity. A person’s job is an important indicator of personal status in society. Particularly for men, who you are is what you do. Some jobs are clearly valued more than others in society. Decent work is better respected. Hence all the interest in job titles.

Non-work or bad work provides none of these benefits and indeed can be an additional source of stress. In short, people resign from bad jobs, not good ones.

Intrinsic Motivation

Psychologists have long distinguished between extrinsic and intrinsic motivation. The former is about pay and conditions, and the results are pretty clear. Pay people fairly, according to factors such as their skills, input, loyalty, and – if possible – above market rates. There are many sorts of constraints on people with respect to this: how much you can pay: what hours need to be worked.

But perhaps more importantly, there is intrinsic motivation. The work of psychologists was highlighted by Daniel Pink in his book Drive. The message is clear: carrot-and-stick motivation does not work anymore. Everyone has an innate drive to be autonomous, self-determined and yet connected to each other. Thus, organisations should concentrate on these drives when managing their staff by creating settings that focus on our innate need to direct our own lives (autonomy), to learn and create new things (mastery), and to do better by ourselves and our world (purpose). People seek out and do not quit from intrinsically motivating jobs.

So, for decent fulfilling jobs, concentrate on three things:

1. Autonomy and Empowerment by providing employees with as much autonomy over some (or all) their work: In particular: when they do it (time of day/week); how they do it (techniques used) whom they do it with (team); what they do (task). One could add to this Where they do it: (home/workplace). Of course, many of these are not in the gift of the employer. The nature of the work often constrains this. Indeed, if the majority of great resignation jobs are considered, it is apparent that they do not afford much opportunity for autonomy.
2. Mastery and Competence which allow employees to become better at something that matters to them. This is about giving people tasks where they can increase their skills and competencies. It is always motivating to have particularly interesting challenges that lead to increased expertise. To do what you like and what you are good at is fundamentally motivating. Next, foster an environment of learning and development, where employees have clear stretch goals, with immediate feedback.
3. Purpose and Mission which is about “believing in the cause”: the idea that people want to believe they are working for a greater good. It means taking steps to fulfil employees’ natural desire to contribute to a cause greater and more enduring than themselves. People who understand the purpose and vision of their organisation and how their individual roles contribute to this purpose are more likely to be satisfied in their work. It means placing equal emphasis on purpose maximisation as opposed to profit maximisation. So, the advice is to use purpose-oriented words – talk about the organisation as a united team by using words such as “us” and “we”, this will inspire employees to talk about the organisation in the same way and feel a part of the greater cause.

The moral of the story is people might be drawn to the publicized (or believed) extrinsic job benefits but it does not ensure they stay; employers often have as much control over intrinsic as opposed to extrinsic factors. Interestingly there is some evidence that young people are more sensitive to intrinsic factors compared to older people, which in part explains the Great Resignation.

Generational Differences

Another issue relevant to the Great Resignation and still much discussed is the issue of generational difference. Some have implied that, quite simply, many young people have lost their work ethic. It has been asserted that “the modern generation” are not interested in traditional jobs and working their way up, as their parents might have done.

Some have asked what attracts young people to jobs:  “sexy brands”, autonomy more than money, playing to their particular skills and values, flat, rather than tall organisations. More importantly, the stated values and mission of the organisation.

Some have implied that, quite simply, many young people have lost their work ethic. It has been asserted that “the modern generation” are not interested in traditional jobs and working their way up, as their parents might have done.

Talk about generations is everywhere and particularly so in organisational science and practice. Recognizing and exploring the ubiquity of generations is important. It is very difficult to do research to answer this question as one needs comparable data which is very difficult to acquire. However, comprehensive studies have been done and they come essentially to the same conclusion that there is no truth in the assertion that “the modern generation” has lost the work ethic.

In an impressive analysis ten years ago, Costanza et al. (2012) showed that any changes in work-related attitudes were not the result of generation differences. They concluded that “The pattern of results indicates that the relationships between generational membership and work-related outcomes are moderate to small, essentially zero in many cases” and that “…differences that appear to exist are likely attributable to factors other than generational membership.”

Most interestingly, they argued that the commonly advanced generational explanation of work attitudes neglects two alternative explanations, both of which explain work motivation better than cohort membership and thus alleged generations. The Life Course Hypothesis suggests work first becomes more important to individuals (until approximately age 40) and then less so, irrespective of birth cohort or period. Middle-aged people are less interested in work, which gives rise to the erroneous view “that later-born generations are work-averse as a generation when in reality, younger individuals have never assigned as much importance to work as those who are middle-aged, which is an age effect.”

The Historical Hypothesis is that the historical period during which a measurement takes place explains work motivation irrespective of an individual’s age and birth cohort. People become work averse over time, which is a period effect related to the passing of historical time, not a cohort effect. “However, because later-born cohorts have been asked later in historical time, the mistaken impression arises that later-born cohorts are work averse as a generation when in reality everyone who is asked later in historical time is less inclined to consider work important.”

Another excellent study explored and “bust” ten common myths about the science and practice of generations and generational differences. Zabel et al. (2017) debunked 10 myths.

Myth #4

Generations are easy to study. They note that the conceptualization of generations as the intersection of age and period makes them impossible to study. There exists no research design that can disentangle age, period, and cohort effects. Artificially grouping ages into “generations” does nothing to solve the confounding of age, period, and cohort effects.

Myth #8

Generations explain the changing nature of work (and society). Generations give a convenient “wrapper” to the complexities of age and aging in dynamic environments. It is more rational and defensible to suggest that individuals’ age, life stage, social context, and historical period intersect across the lifespan.

Myth #10

Talking about generations is far from benign as it promotes the spread of generationalism, which can be considered “modern ageism.” They argue that generationalism is defined by sanctioned ambivalence and socially acceptable prejudice toward people of particular ages. The use of generations to inform differential practices and policies in organisations poses a great risk to age inclusivity, and the legal standing, of workplaces.

The research, as always, highlights that things are more complicated than most people think. Trying to explain the Great Resignation by the Generation Difference hypothesis is essentially simplistic and misleading.

Debunking the Gen-Myth

The Great Resignation has stimulated, as expected, a lot of recent research on worker preferences. The question is simple: are there consistent and important temporal differences in the factors that influence job choice, motivation and retention? In an important research paper by McKinsey consultants, De Smet at al. (2023) reported on two large surveys, one of 13,386 and one of 16,246 international workers. Their top-line conclusion was:

“Among those who plan to leave their jobs, the main reasons are the same across age groups: inadequate compensation, lack of career development and advancement, and uncaring leadership. What’s more, the top reasons for leaving their previous jobs are the same for both younger and older workers, and are the same reasons different age groups gave for why they might leave their current jobs. These results suggest that many organizations still struggle to address the same issues that their employees care most about: fair and adequate compensation, career development, and caring leaders.

They did find some nuanced findings: The Gen Zers, compared to older employers, placed more emphasis on career development and advancement potential, and less on compensation. Both groups placed importance on work flexibility, but for different reasons (the young for social reasons, the older for family reasons).

The Gen Zers, compared to older employers, placed more emphasis on career development and advancement potential, and less on compensation.

What their report does is address management issues today, and how generation-based research suggests how organisations can do better through staff recruitment, management and hence retention. The focus on better management will prevent demotivation leading to the Great Resignation.

Conclusion

Talk about and interest in the Great Resignation has led to a renewed focus on what is good (decent, motivating) work, as well as age and generational differences in work preferences. There is little new in our understanding of the features of a good job for all people. We know how to describe and therefore design good jobs although we accept there are many constraints on employers always to provide them. People will always choose decent work and try to avoid dead-end, badly paid, menial jobs.

There is however some evidence of, albeit small, differences, in particular job features which are explicable in terms of different factors like age and life stage.

What the debate has done most beneficially is to focus on how to manage people of all ages. It has shown changes in the workplace as a function mainly of the Covid crisis and technology have highlighted the factors that are associated with good management. Rather than scapegoat any group, we need to refocus on how to manage all people in a rapidly changing work environment.

About the Author

Adrian Furnham is in the Department of Leadership and Organisational Behaviour at the Norwegian Business School.

References

• Aitken, J.A., Cannon, J.A., Kaplan, S.A., and Kim, H. (2023). The Benefits of Work: A Meta-Analysis of the Latent Deprivation and Agency Restriction Models. Journal of Business and Psychology.

• Costanza, D.P., Badger, J.M., Fraser, R.L. et al. (2012). Generational Differences in Work-Related Attitudes: A Meta-Analysis. Journal of Business and Psychology. 27, 375–394.

• De Smets, A. et al. (2023). Gen What? Debunking Age-Based Myths about Worker Performance. Philadelphia

• Marks, A. (2023). The Great Resignation in the UK – Reality, Fake News or Something in Between? Personnel Review, 52(2) 408-414

• Nourafkan, N.J., and Tanova, C. (2023). Employee Perceptions of Decent Work: A Systematic Literature Review of Quantitative Studies. Current Psychology, 42, 29772 – 29800.

• Pink, D. (2009). Drive: The Surprising Truth about What Motivates Us. (New York: Riverhead Books).

• Rudolph, C.W., Rauvola, R.S., Costanza, D.P. et al. (2021). Generations and Generational Differences: Debunking Myths in Organizational Science and Practice and Paving New Paths Forward. Journal of Business and Psychology, 36, 945–967.

• Serenko, A. (2022). The Great Resignation: The Great Knowledge Exodus or the Onset of the Great Knowledge Revolution? Journal of Knowledge Management, V

• Zabel, K.L., Biermeier-Hanson, B.B.J., Baltes, B.B. et al. (2017). Generational Differences in Work Ethic: Fact or Fiction? Journal of Business and Psychology, 32, 301–315.

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It doesn’t take long to recall prominent business disasters. Volkswagen’s “emissions-gate” is still before the courts and there are regulatory and legal ripples associated with money laundering by both Danske and Deutsche Banks. Similarly, the UK’s Post Office and water utilities industry have a long way to go before they can see closure. 

However, many business disasters take place at a more regional level, and you don’t hear about them. The list of industries involved is long: energy, mining, construction, rail, water, government agencies, agriculture … I also suspect many industries that are trying to force people back into their offices full-time are currently nurturing a disaster. 

While disasters come in all shapes and sizes, there are always some things in common. If you’re tasked with navigating a way for your organisation out of the mess, you need to have clear expectations of what lies ahead of you because the alternative can be soul-destroying. 

The Storm That’s Brewed 

In no particular order, here is a cheat-sheet to help you learn, in a few minutes, what most leaders learn through rude awakenings after months, or indeed years, of trial and error: 

1. Disasters never resolve themselves quickly. If your organisation is grappling with a disaster that is self-inflicted, the affected will often put their lives on hold to ensure that a “win-loss” outcome is achieved.  
2. These experiences are draining, and organisations rarely proactively look after its people.  
3. In a world grappling with frenetic, uncertain, complex change, and where there is more polarisation on the big-picture issues, I believe business disasters will occur more frequently. That not only leaves organisations at risk of being brittle, but leaders and managers as well. 

Hence, leaders being resilient in the face of disasters is vital. And, it is never easy, no matter how experienced a leader or manager you are.  

Of course, resilience is about bouncing back and managing your energy levels when you are subjected to pressure and pointed anger; but while navigating a disaster, it’s about much more.  

It is about being able to make good decisions in the moment rather than in hindsight. It is about treating employees and others who have a stake in the disaster with dignity. It is about seeking to accept the present for what it is, and positively turning a disaster into an opportunity. And most confronting of all, it is about being able to bounce back when you must fundamentally re-evaluate your beliefs in the face of the disaster. 

Your Opportunity in the Face of the Storm 

Even when navigating a disaster, it is important to know there are plenty of ways that you can be better for yourself, your teams, organisation, and those that you love. 

Step outside the heat of the moment

It is easy to be consumed by the disaster and feel that the only way to overcome it, is to work harder and longer hours. Instead, while it may feel counterintuitive in the moment, there is huge value in doing things you enjoy: walking, jogging, swimming, gardening. Whatever activity it is, this pause will allow you to get away from the white noise and give you space to think more clearly. 

Step outside the issue

Don’t isolate yourself and keep talking. Brainstorm with your teams where things are at, what else needs to be done and what is being missed.  

Share what you are going through with people you trust, particularly people who are not immersed in the disaster with you.  

Step outside your organisation’s modus operandi

Many organisations grappling with disasters exhibit a siege mentality. Their leaders and managers become insular and defensive in the face of pressure.  

It may, initially, feel scary but there is great value in transcending the us and them mindset and instead, reaching out to those affected. Don’t be rigid. By truly listening to these people and understanding where they are coming from, it can help you to realise that things may not be as bad as you had assumed. 

Step outside your story

Leaders and managers are often wired to a much larger societal story about the need to control what surrounds them. Particularly during a disaster, there is an unspoken belief that by trying to control the process, the narrative and what the affected will accept, the outcomes can also be controlled for the organisation. Yet, for organisations, leaders, and managers, it is this desire to control that has either created and/or exacerbated the disaster.  

Therefore, self-reflection is important: ‘Why do I think, behave, feel like this?’ ‘What skills do I require to prevent future disasters?’ Gaining access to a coach or mentor can also be motivating and ensures you take a proactive rather than reactive approach.  

Importantly, as you learn from mistakes, lean into them and be kind to yourself. These situations are never easy. And ask yourself, how I can not only survive but thrive during this business disaster?

About the Author

David Ross is an international VUCA strategist and organisational peacemaker, helping leaders, organisations and communities successfully deal with their most complex – and often, controversial – issues. David is also founder of Phoenix Strategic Management and author of Confronting the Storm: Regenerating Leadership and Hope in the Age of Uncertainty  

The post How to Build Personal Resilience to Navigate a Business Disaster appeared first on The European Business Review.

It has become increasingly common for companies to implement supply-chain diversity to maintain a good image and show commitment to sustainability efforts. Here are some insights into how Fortune Global 500 companies are diversifying their supply chains.

As companies face growing demands for supply-chain transparency and inclusive workplaces, many, especially in the US and Europe, are stepping up efforts to expand their supplier diversity.

Gone are the days when companies could consider their supply chain – the complex web of third-party contractors and sub-contractors – to be independent of headquarters. An important turning point came in 2013 with the collapse of the infamous Rana Plaza in Bangladesh which killed more than 1,100 people and revealed just how little many Western fashion brands knew about who was making their clothes and under what conditions.

Now global companies are expected to know who is producing their goods and providing their services, and that their basic values are aligned. Those who don’t, risk serious damage to their reputation. Additionally, for companies taking sustainability seriously, the supply chain forms part of Scope 3 emissions, which include not only a company’s directly owned or controlled activities but also its full value chain.

An increasing number of companies include diversity under the umbrella of social responsibility. As a consequence, supplier diversity efforts are a natural extension of the heightened awareness of supply chains and drives to create more inclusive and diverse companies.

To understand what companies are doing and where, we examined the supplier diversity initiatives of Fortune Global 500 companies in 2020 and 2022.¹ We found that, overall, North American companies lead the way in implementing diversity programmes, but Europe is gaining ground. At the other end of the spectrum, firms from East and Southeast Asia – the majority of the list of companies – have little demonstrated interest in the issue. 

The numbers speak for themselves. Of the 214 Asian companies among the Fortune Global 500 companies, only 7% had specific supplier diversity programmes in 2022; in 2020, that percentage was 5.4%. Of the 117 North American companies, 86% had programmes in 2022, up from 79% in 2020. Western Europe had 43 companies on the list: 35% of them had diversity programmes in 2022, up from 28% in 2020. 

History and Context of Supplier Diversity

In our recently published paper, and based on our analysis of the Fortune Global 500 companies as well as in previous academic literature, we define supplier diversity as the effort made by a company to increase the relationships it has with suppliers that are owned or operated by disadvantaged groups and to improve those already in place. What counts as a disadvantaged group varies by country and region; depending on cultural and historical context, different places have their own distinctive demographics and groups that have suffered from a lack of opportunities.

But while there are variations, companies do coalesce around certain areas. The dimensions with more than 100 mentions in our data are gender, disability, sexual orientation, age/generation, ethnicity, race, gender identity, nationality, religion/creed and veterans (disabled or not). We note that 96% of the companies with a specific supplier diversity definition refer to gender, far more than any other dimension; broken down by region, gender tops the list everywhere.

It is useful to understand how supply-chain diversity has evolved. While diversity, equity and inclusion (DEI) has become another salvo in the US culture wars in recent years, diversity initiatives in supply chains started there during the Civil Rights movement in the mid-1960s² as a way to reverse long-standing discrimination against companies owned by ethnic minorities and women. Initially, the US federal government spearheaded efforts, using its procurement practices to target support for minority corporations.³ Over the years, the private sector climbed on board.

Globally, the UK was the first country to follow the US in adopting intentional policies to increase supplier diversity, particularly among ethnic minority- and women-owned businesses.⁴ Western Europe has joined this trend over the last several years.

Because the US was a pioneer in this area, many concepts have been rooted in its demographics and the groups traditionally discriminated against there. But each region is putting its stamp on policies. Many companies worldwide refer to ethnicity, but this may involve different concepts in different places (for example, immigrants in Europe and Aboriginal peoples in Australia). Companies that work with suppliers based in India sometimes refer to caste. In definitions of diverse suppliers, the US includes those owned by military veterans. Age is mentioned in places such as Asia and Europe, but less so in North America. Sexual orientation is often referenced by firms in Western Europe and North America but not in other regions represented in the sample.

It is worth noting which diversity dimensions are found in East and Southeast Asia, even if the initiatives are relatively scarce since they do not coincide with those from North America. The areas most often referenced by Asian companies are age/generation, nationality, disability and religion/creed.

How Companies Diversify Their Supply Chains

We found that companies implement supplier diversity efforts in two main ways: by creating specific supplier diversity programmes and/or by embedding diversity requirements into supplier codes of conduct (SCoC). The programmes tend to be more proactive in seeking to do business with a diverse group of vendors. They have been shown to have a number of intangible benefits for the buyer firm, including a stronger reputation, recognised leadership and the building of more robust partnerships.⁵

Broader in scope, supplier codes of conduct cover a range of topics beyond diversity, in order to foster ethical conduct within all organisations in the supply chain. They can convey a company’s values, covering areas including labour conditions such as maximum hours and minimum wages and ethical behaviour such as zero tolerance for bribery. Whereas SCoCs are guidelines to be followed by all vendors, supplier diversity programmes can be targeted to specific and, potentially, small subsets of suppliers, such as firms owned by individuals of a specific ethnic minority.

Again, location played a role in which approach companies generally take. US companies seem to lean more toward running supplier diversity programmes, while European firms tend to incorporate their diversity goals into their supplier code of conduct.

Correlation With Internal Diversity and Sustainability

By sector, finance and healthcare companies most actively pursued diversity among vendors. From the 2022 Fortune Global 500 data, the sector with the highest proportion of supplier diversity programmes is healthcare, with 72%, followed by motor vehicles and parts (51%) and technology (50%). Regarding diversity in their SCoCs, firms in the financial sector show the most activity, with 60% of companies, followed by the healthcare sector with 56%.

But beyond sector, it is a certain type of company that pays attention to supplier diversity, one that is concerned about the composition of its workforce and is also committed to sustainability more broadly.

Of the 2022 sample of 500 companies, 379 reported some form of data on employee diversity (e.g., gender or racial composition of their workforce); those that did were much more likely to have a supplier diversity programme than those that did not. Some 45% of companies that reported on internal diversity also had a supplier diversity programme; in contrast, only 7% of companies that failed to report on their own diversity had a supplier diversity programme. 

A similar pattern is seen around supplier sustainability. Companies that responded to public pressure to reduce their negative environmental and social impact with initiatives that addressed those challenges in their internal operations and/or immediate communities⁶ are also more likely to have supplier diversity programmes. Companies lacking in supplier sustainability initiatives are also generally lacking in supplier diversity initiatives.

We expect supplier diversity initiatives to be increasingly common among top global companies in the coming years. They respond not only to public expectations but also to demographic realities. If populational trends continue, companies owned by ethnic minorities and women will represent a majority of small businesses in the future. Companies that overlook them will be at a growing disadvantage.

About the Authors

Anna Sáez de Tejada Cuenca is an assistant professor in IESE Business School’s Operations, Information and Technology Department. She holds a PhD in Operations Management from the UCLA Anderson School of Management, an MSc in Mathematical Engineering and a BSc in Mathematics from the Universitat Politècnica de Catalunya. Anna’s research interests include sustainability, social responsibility and the circular economy, with a focus on the fashion industry.

Gemma Berenguer is an associate professor at the Universidad Carlos III de Madrid and was an assistant professor at Purdue University. She holds a PhD in Operations Research from the University of California, Berkeley. She also holds a MEng in Logistics and Supply Chain Management from ZLC, an MSc in Economics from the Barcelona School of Economics and a BSc in Mathematics from the Universitat Politècnica de Catalunya. Her main research topics are nonprofit supply chain management, sustainable operations and supply chain design.

References

1. Berenguer G., Costas Lorenzo N. and Sáez de Tejada Cuenca A (2024). The State of Supplier Diversity Initiatives by Large Corporations: The New Sustainable Supply Chain? Production and Operations Management: 1–11.
2. Bateman A., Barrington A., Date K. (2020). Why You Need a Supplier-Diversity Program. Harvard Business Review, August 17.
3. Shah M. and Ram M. (2006). Supplier Diversity and Minority Business Enterprise Development: Case Study Experience of Three US Multinationals. Supply Chain Management: An International Journal 11(1): 75–81.
4. Ram M., Theodorakopoulos N. and Worthington I. (2007). Policy Transfer in Practice: Implementing Supplier Diversity in the UK. Public Administration 85(3): 779–803.
5. Porter KK. (2019). Implementing Supplier Diversity: Driver of Entrepreneurship. Springer.
6. Thorlakson T., de Zegher JF and Lambin EF. (2018). Companies’ Contribution to Sustainability through Global Supply Chains. Proceedings of the National Academy of Sciences of the United States of America 115(9): 2072–2077.

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Protecting senior leaders from burnout is essential for sustainable business success. This article from award-winning leadership coach and Amazon best-selling author, Andy Brown, outlines a three-step programme to help senior leadership teams recognise and manage their emotional overdrafts by; 1) Understanding emotional overdraft and its impact, 2) Recognising individual triggers, and 3) Applying the 20% rule to enhance leadership impact and resilience. 

Senior leaders often find themselves subsidising their business success at the cost of their own physical and mental wellbeing – what I call their ‘emotional overdraft’.  Living in your emotional overdraft leads to stress, overwhelm, and eventually, burnout. For the business it equates to a less resilient organisation, more sick days and a significantly less impactful senior leadership team.   

Understanding the Emotional Overdraft 

An emotional overdraft occurs when leaders expend more emotional and mental resources than they can replenish, leading to diminished resilience and effectiveness. It’s the invisible line in a company’s P&L and can significantly impact both personal wellbeing and professional performance. Embedding an understanding of the emotional overdraft into your senior leadership team can multiply and accelerate positive business outcomes, strengthen team resilience, and foster mutual support among team members. 

Step 1: Recognise the Ubiquity of Emotional Overdrafts 

The first step in protecting senior leaders from burnout is acknowledging that everyone, including themselves, operates with an emotional overdraft. Every leader I’ve worked with, regardless of their success, has experienced this to some degree. By recognising this universal challenge, leaders can begin to monitor their emotional wellbeing proactively. 

Step 2: Identify Individual Drivers and Behaviours 

Understanding how emotional overdrafts manifest individually is crucial. In my research, I’ve identified ten drivers and resulting behaviours that often lead to emotional overdraft: 

1. Duty: Feeling that it’s their responsibility to take on tasks, often to the detriment of personal time. 
2. Self-worth: Associating their value with their professional achievements. 
3. Trust: Struggling to delegate because they believe only they can do the job right. 
4. Empathy: Overextending themselves to support others, neglecting their own needs. 
5. JFDI (Just Flipping Do It): Taking on tasks impulsively to get things done quickly. 
6. Urgency: Constantly feeling rushed and pressured. 
7. Cost: Worrying about the financial implications of delegating tasks or hiring help. 
8. At a Loss: Feeling stuck and out of ideas, leading to frustration and burnout. 
9. Load Balancing: Juggling multiple roles and responsibilities without adequate support. 
10. Expectation: Believing stress and struggle are inherent to leadership roles. 

Leaders can use tools like the Emotional Overdraft Self-Assessment to identify their specific triggers and understand how these drivers impact their daily lives. 

Step 3: Implement the 20% Rule to Improve Leadership Impact 

One effective strategy to mitigate your senior teams’ emotional overdraft is to ask them all to try the 20% rule. Leaders often allocate their time as follows: 

• 20% on tasks only they can perform. 
• 20% on skilled tasks that others could do with the right experience. 
• 20% on complex work that doesn’t require specialist expertise. 
• 20% on tasks that others in their team can handle. 
• 20% on routine tasks that anyone could do. 

By eliminating the last 20%, leaders can double the time spent on core responsibilities, focusing on tasks that truly require their expertise. This not only enhances their impact but also reduces unnecessary stress and workload. 

Putting It into Practice 

To embed these principles into your senior leadership team: 

1. Collect and monitor data: Encourage leaders to track their emotional overdraft and share the results regularly. This visibility builds a level of accountability and supports collective efforts to reduce these overdrafts. 
2. Support each other: Build a culture of mutual support where leaders help each other identify and address their emotional triggers. This not only alleviates individual burdens but also strengthens the team’s overall resilience. 

Protecting senior leaders from burnout through awareness, recognition of individual triggers, and practical strategies like the 20% rule can lead to a more resilient and effective leadership team. By prioritising emotional wellbeing, organisations can ensure long-term success and create a healthier, more sustainable work environment.

About the Author

Andy Brown is a bestselling author and renowned leadership coach with over 25 years of experience. His book, The Emotional Overdraft: 10 Simple Changes for Balancing Business Success and Wellbeing, provides actionable insights for leaders looking to achieve professional success without sacrificing their mental and physical health. 

The post How to Protect Your Senior Leaders from Burnout: Simple, Company-Wide Leadership Behaviour Changes to Help  appeared first on The European Business Review.

By Simon L. Dolan, Adnane Belout, Jean-Luc Cerdin, and Javier Casademunt¹

Introduction

Organisational resilience refers to an organisation’s ability to adapt, respond, and recover from disruptive events and changes in its environment. In a VUCA world, which stands for volatility, uncertainty, complexity, and ambiguity, organisational resilience becomes even more crucial.

To become resilient, the organisation needs to develop certain characteristics that were not so crucial in running the business in former years but have become so essential in today’s business. For a firm, not being able to adjust quickly may lead to death and extinction. The objective of this article is to describe the principal features of organisational resilience, with an emphasis on culture, structure, leadership, and other relevant features.

What are resilient organisations according to Deloitte’s 2020 report?²

To become resilient, the organisation needs to develop certain characteristics that were not so crucial in running the business in former years but have become so essential in today’s business

In the wake of a tumultuous 2020, Deloitte Global’s fourth annual readiness report explores the concept of organisational resilience. Deloitte consultants wanted to know how organisations were coping with the unexpected challenges they faced in the past year and get their opinions about what made their organisations able to withstand chaos. From that analysis, they sought to identify what traits define resilient organisations – traits business leaders can emulate to build greater resilience into their own organisations.

The Deloitte report has identified five characteristics of resilient organisations that enabled and promoted nimble strategies, adaptive cultures, and the implementation and effective use of advanced technology. Businesses that were able to bounce back from unexpected challenges typically were:

1. Prepared. Most successful CXOs³ plan for eventualities, both short- and long-term. More than 85 per cent of CXOs whose organisations successfully balance addressing short- and long-term priorities felt they had pivoted very effectively to adapt to the events of 2020, whereas fewer than half of organisations without that balance felt the same.
2. Adaptable. Leaders recognise the importance of having versatile employees, especially after a year like 2020. To that end, flexibility / adaptability was, by far, the workforce trait that CXOs said was most critical to their organisations’ future.
3. Collaborative. CXOs indicated the importance of collaboration within their organisations, noting that it speeded up decision-making, mitigated risk, and led to increased innovation. In fact, removing silos and increasing collaboration was one of the top strategic actions CXOs took before and during 2020.
4. Trustworthy. CXOs understand the challenge of building trust. More than a third of responding CXOs were not confident that their organisations had succeeded in developing trust between leaders and employees. Those who are succeeding are focusing on improving communication and transparency with key stakeholders, as well as leading with empathy.
5. Responsible. Most CXOs acknowledge that the business world has a responsibility beyond the bottom line. Eighty-seven per cent of surveyed CXOs who said they had done very well at balancing all their stakeholders’ needs also felt that their organisations were able to adapt and pivot quickly in response to disruptive events. That’s nearly 50 percentage points more than the proportion of CXOs who said the same at organisations that hadn’t done well at balancing their stakeholders’ needs.

A culture of business resilience

The culture of business resilience is a mindset and set of values that prioritise the ability to adapt, recover, and thrive in the face of adversity or disruption. It involves a proactive approach to risk management and a commitment to building and maintaining the necessary capabilities to withstand and recover from various challenges.

The culture of business resilience includes the following key features, which include some that were described in the Deloitte report, as well as many more:

Key Feature I: Preparedness

The organisation must be proactive in identifying and assessing potential risks and vulnerabilities and take steps to mitigate them before they occur. This includes having robust contingency plans in place and regularly testing and updating them.

• Risk assessment and contingency planning: Conduct a thorough risk assessment to identify potential risks and vulnerabilities. This includes analysing internal and external factors such as political instability, economic fluctuations, natural disasters, cybersecurity threats, and supply chain disruptions.
• Maintain, diversify, and strengthen supply chains: Relying on a single supplier or location can be risky. Businesses should consider diversifying their supply chains, sourcing from multiple regions, and establishing alternative suppliers.
• Ensure robust cybersecurity measures: With increasing cyber threats, businesses must prioritise cybersecurity preparedness. Implement strong security systems, regularly update software, train employees on cybersecurity best practices, and have incident response plans to quickly address any breaches or attacks.
• Foster a culture that encourages innovation and flexibility: This will enable quick decision-making and the ability to pivot when needed. Regularly assess market trends and customer needs to stay ahead of the competition.
• Strengthen financial resilience: Maintain a healthy financial position to weather uncertainties. Have adequate cash reserves, diversify revenue streams, and establish relationships with financial institutions.
• Have a crisis communication plan in place: Establish a comprehensive crisis communication plan to effectively communicate with employees, customers, stakeholders, and the public during times of uncertainty or crisis.
• Invest in employee training and well-being: This will enhance employees’ skills and knowledge, making them more adaptable to changing circumstances.
• Conduct scenario-planning exercises: This helps to anticipate potential future events and their impact on the business.
• Implement continuous monitoring and evaluation routine plans: Reassess the effectiveness of preparedness measures. Stay updated on emerging risks and trends and adapt strategies accordingly.

Key Feature II: Agility

An agile organisation refers to a company or institution that embraces the principles of agility in its operations, decision-making processes, and overall organisational structure. This is characterised by its ability to quickly adapt, respond to changes, and remain competitive in a rapidly evolving business environment. Here are a few examples of agile organisations:

An agile organisation refers to a company or institution that embraces the principles of agility in its operations, decision-making processes, and overall organisational structure.

• Spotify: Is known for its agile organisational structure, where teams work in small, autonomous squads that make decisions independently, experiment with new ideas, and adapt to changing customer needs.
• Amazon: Is renowned for its agility, driven by its customer-centric approach. It encourages employees to experiment, take risks, and learn from failures.
• Zappos: Is an online shoe and clothing retailer that has built an agile organisation by focusing on core values such as customer service, employee empowerment, and innovation.
• Google: Is known for its ability to adapt to changing market conditions and continuously innovate. It promotes a culture of experimentation.
• Toyota: Is often cited as an example of an agile organisation due to its renowned Toyota Production System (TPS), which emphasises continuous improvement, waste reduction, and the empowerment of employees to identify and solve problems.

These organisations showcase different approaches to agility, but all share a common focus on flexibility, adaptability, and continuous improvement to remain successful in dynamic business environments.

Key Feature III: Learning and Innovation

Many studies show that an organisation that has a culture of continuous learning and improvement encourages employees to learn from past experiences and uses them to inform future actions. It also fosters an environment of innovation, where new ideas and approaches are encouraged and supported.

Overall, a learning and innovation culture is essential for business resilience. It enables organisations to embrace change, continuously improve, solve problems creatively, take calculated risks, share knowledge, and stay future-ready. These attributes help businesses withstand challenges and thrive in an ever-evolving business landscape.

Key Feature IV: Collaboration and Communication

An organisation that is transparent about its common values and communicates them to the workforce repeatedly, both to internal and external stakeholders, promotes collaboration across different functions and departments, as well as with external partners and stakeholders. This enables the sharing of information, expertise, and resources, which is critical in times of crisis.

Sharing and leveraging values allows individuals and teams to share their knowledge, expertise, and experiences. This sharing of information helps organisations to better understand their challenges and potential solutions, enabling them to adapt and respond effectively to disruptions or crises.

Collaboration and effective communication foster trust and build strong relationships among team members and departments. This trust enables individuals to rely on each other, share information freely, and work together towards common goals, even in challenging times.⁴ Strong relationships also help organisations to mobilise resources, access external support, and leverage partnerships to enhance their resilience.

Key Feature V: Leadership and Corresponding Accountability

The organisation’s leaders must be committed to building a culture of resilience by setting the tone from the top. They should lead by example, demonstrating resilience themselves, and hold themselves and others accountable for maintaining resilience capabilities.

Accomplished leaders can sustain organisational resilience by articulating and communicating a clear vision of where the organisation is headed. This helps in building a sense of purpose and direction within the organisation, enabling it to adapt and bounce back from challenges.

Sometimes, it is easier to describe the characteristics of an effective and resilient leader by focusing on the antithesis, leaders whose actions can become counterproductive to themselves and to their organisation. Among the features of such anti-resiliency leaders, we can identify:

• Employing a strategy of personal attacks and bullying: Social media platforms often witness political or business leaders engaging in personal attacks and bullying tactics against their opponents. This not only sets a negative example to the public but also distracts from meaningful debates and discussions on important issues.
• Lack of transparency: Instead of using social media to provide transparent and honest communication, some leaders may use it as a tool to obfuscate or manipulate information. This can erode trust in public institutions and contribute to a growing sense of cynicism among the public.
• Oversimplification of complex issues: Twitter’s character limit can lead to oversimplification of complex issues by political or business leaders. This can result in nuanced topics being reduced to sound bites and slogans, failing to address the intricacies and complexities that require thoughtful analysis and discussion.
• Inciting violence or hate speeches: Political or business leaders with a large following on social media can potentially use their platforms to incite violence or spread hate speech. Such messages can contribute to a toxic online environment and have real-world consequences, including acts of violence or discrimination.
• Lack of accountability: Social media platforms often lack effective mechanisms to hold political or business leaders accountable for their messages. This can allow leaders to spread false information, engage in unethical behaviour, or avoid taking responsibility for their actions.
• Bombarding with spam messages: This happens when the leader bombards their followers with excessive promotional content or irrelevant information, without providing any real value or engaging with their audience.

Key Feature VI: Controlling Emotions – Emotional Intelligence

Resilient leaders are empathetic and understand the emotions and concerns of their employees. They can provide emotional support, foster a positive work environment, and help employees cope with adversity, thus enhancing the overall resilience of the organisation.

Overall, emotional intelligence leaders can build strong relationships, promote a positive work culture, encourage open communication, manage conflicts effectively, and adapt to change, contributing to the organisation’s ability to withstand and recover from adversity.

Key Feature VII: Building a Capable Team

Accomplished leaders understand the importance of building a strong and capable team. They hire the right talent, provide them with the necessary resources and support, and empower them to take ownership of their work. This creates a resilient workforce that can effectively respond to and overcome challenges. In other words, a leader who builds a capable team contributes to business resilience by ensuring that the team is equipped with the necessary skills, knowledge, and resources to handle challenges and adapt to change. Here are some ways in which such a leader fosters business resilience.

Key Feature VIII: Promote Genuine Employee Well-Being

A real must for organisational resilience is the recognition of the importance of the well-being of the employees. This promotes work-life balance, provides resources for mental and physical health, and offers support during challenging times, helping to build a resilient workforce that can effectively cope with stress and adversity⁵.

Healthy employees are better equipped to deal with adversaries for several reasons:

• Healthy employees have higher physical stamina and energy levels, allowing them to handle challenging situations more effectively.
• Good physical health is closely linked to mental well-being. Healthy employees are more likely to have better cognitive function, including improved memory, focus, and problem-solving abilities.
• Physical fitness and overall health contribute to emotional stability. Healthy employees are better equipped to handle stress, anxiety, and other negative emotions that may arise when dealing with adversaries.
• Good health boosts the immune system, making healthy employees less susceptible to illness and more resistant to the physical effects of stress.
• Maintaining good health often involves adhering to healthy habits and self-care routines.
• Healthy employees are more likely to engage in teamwork and to contribute positively to team efforts, which can be crucial when dealing with issues that require collective problem-solving and cooperation.

Towards a systemic view of organisational resilience

An interesting angle from which to view organisational resilience is to examine the organisation in a more holistic and systemic perspective. Figure 1 proposes the principal subsystems that need to be analysed and strengthened to build organisational resilience.

Figure 1: A systemic view of organisational resilience

Let’s add a few words on each of the six subsystems that operate in every organisation.

Subsystem I – Workforce & Leadership Resilience

Workforce and leadership resilience refers to the ability of individuals and organisations to adapt, recover, and thrive in the face of challenges and adversity in the workplace. It encompasses the skills, attitudes, and resources necessary to navigate and overcome stress, change, and uncertainty.

Here are some examples of firms that, over the years, have shown the resiliency of their workforce:

• Johnson & Johnson: Is a multinational pharmaceutical and consumer goods company that has a reputation for its strong commitment to employee well-being and resilience. They provide extensive employee support programmes, including mental health resources and stress management initiatives, which help their workforce stay resilient in the face of challenges.
• Southwest Airlines: Is known for its resilient workforce, which invests heavily in employee training and development and fosters a sense of camaraderie and support among its staff.
• Netflix: Is a popular streaming service known for its innovative and resilient workforce and embraces a culture of freedom and responsibility, allowing employees to take risks and learn from failures.

Obviously, and as we have discussed before, to nurture workforce resilience, leaders need to withstand and adapt to the challenges, setbacks, and uncertainty while maintaining a positive and proactive approach. They possess a strong sense of purpose, emotional intelligence, and the ability to make tough decisions in the face of adversity and “sell it to the workforce” as a real necessity.

Subsystem II – Strategic Resilience

Accomplished leaders understand the importance of building a strong and capable team. They hire the right talent, provide them with the necessary resources and support, and empower them to take ownership of their work.

Strategic corporate resilience refers to a company’s ability to withstand and adapt to various internal and external challenges while maintaining its long-term goals and competitive advantage. It involves proactive measures and preparedness to navigate through uncertainties and disruptions. Here are a few examples of strategic corporate resilience:

• Diversification: For instance, an electronics manufacturer that produces smartphones may diversify into wearable technology or home appliances to reduce its dependency on a single product line.
• Sustainable practices: Companies can demonstrate resilience by adopting sustainable practices that help them mitigate risks associated with environmental and social issues. An example might be an energy company investing in renewable energy sources to reduce its reliance on fossil fuels and comply with changing regulations.
• Crisis management: Building a robust crisis management plan is crucial for corporate resilience. This involves identifying potential risks, establishing clear communication channels, and implementing protocols to effectively respond to crises.
• Innovation and technology adoption: Embracing innovation and leveraging emerging technologies can enhance a company’s resilience. An example could be an automotive manufacturer investing in electric vehicles and autonomous driving technology to adapt to changing consumer preferences and industry trends.
• Supply chain resilience: This includes diversifying suppliers, creating redundancies, and implementing risk management strategies. For instance, an apparel retailer might maintain relationships with multiple suppliers across different regions to mitigate risks associated with disruptions in a single country.
• Talent management: Investing in talent development and retention strategies is essential for corporate resilience. This involves creating a culture of learning and innovation, providing opportunities for skill development, and having a succession plan in place to ensure continuity in leadership.

Subsystem III – Technological Resilience

Corporate technological resilience refers to a company’s ability to withstand and recover from technological disruptions, including cyberattacks, system failures, or emerging technologies. It involves having robust technology infrastructure, effective cybersecurity measures, and the ability to adapt and innovate in the face of technological advancements. Here are a few examples:

• IBM: In the 1990s, IBM faced significant challenges due to the rise of personal computers, but the company successfully transformed itself by shifting its focus towards services and consulting. This resilience helped IBM stay relevant and thrive in the rapidly evolving tech industry.
• Microsoft: Microsoft has demonstrated technological resilience through its ability to address security vulnerabilities and respond to cyberattacks. For instance, after the infamous WannaCry ransomware attack in 2017, it quickly released patches and updates to protect its systems and help customers mitigate the risks.
• Amazon: Amazon’s technological resilience is evident in its cloud computing arm, Amazon Web Services (AWS), which offers a highly reliable and scalable infrastructure, enabling businesses to build resilient applications and withstand technological disruptions. Recently, they have also incorporated AI technologies into their services and products to strengthen the company’s resilience.
• Tesla: Tesla has revolutionised the automotive industry by introducing electric vehicles and autonomous driving technologies. Tesla’s resilience is focused on embracing new technologies.
• JPMorgan Chase: One of the largest banks globally, the company demonstrates technological resilience by investing in cybersecurity and developing advanced fraud detection systems. It is continuously enhancing the technology infrastructure to protect customer data and prevent cyberattacks.

Subsystem IV – Financial Resilience

Financial corporate resilience refers to the ability of a company to withstand and recover from financial shocks or disruptions, such as economic downturns, market volatility, natural disasters, or regulatory changes. It involves having strategies, policies, and practices in place to mitigate risks and ensure the long-term stability and sustainability of the company’s financial position.

Examples of financial corporate resilience measures include:

• Diversification of revenue streams: By diversifying their revenue streams across different products, services, or geographical regions, companies can reduce their exposure to specific risks. For example, a technology company may diversify its revenue by offering both hardware and software products.
• Strong capital and liquidity management: Maintaining adequate capital reserves and liquidity buffers is crucial for withstanding financial shocks. They ensure sufficient cash flow, access to credit facilities, and a well-structured debt profile in any given context of distress.
• Risk management and contingency planning: This is essential for identifying and mitigating potential risks. Companies that prioritise risk management conduct regular stress tests, scenario analyses, and have contingency plans in place. For instance, financial institutions may stress-test their portfolios to evaluate the impact of adverse market movements on their capital positions.
• Sustainable cost management: Prudent cost management is vital for financial resilience. Companies that maintain a disciplined approach to cost control can better weather economic downturns or market volatility.
• Adapting to changing market conditions: This involves quickly adapting to changing market dynamics, monitoring industry trends, customer preferences, and regulatory changes to identify potential risks and opportunities. For example, companies that successfully transition from traditional brick-and-mortar retail to e-commerce have demonstrated financial resilience.
• Robust corporate governance: Sound corporate governance practices contribute to financial resilience by ensuring effective oversight, risk management, and accountability. Such companies have independent boards, transparent decision-making processes, and effective internal controls. In the end, this fosters confidence among investors and stakeholders, helping to maintain financial stability.

It is important to note that financial corporate resilience is not a one-size-fits-all concept, and the specific measures taken by companies may vary based on their industry, size, and other factors.

Subsystem V – Operational Resilience

Operational corporate resilience refers to an organisation’s ability to withstand and adapt to various internal and external disruptions while maintaining critical operations and delivering value to stakeholders. It involves strategies, processes, and structures designed to identify, assess, and mitigate risks and vulnerabilities that could impact the organisation’s ability to function effectively.

Examples of operational corporate resilience measures include:

• Business continuity planning: It is essential to ensure that the business functions during and after a disruption. This includes identifying critical processes, establishing backup systems and infrastructure, and creating communication protocols.
• Incident response and crisis management: Establishing protocols and procedures to effectively respond to incidents and crises. This includes defining roles and responsibilities, establishing communication channels, and conducting regular drills and simulations to test response capabilities.
• Employee resilience: Building resilience within the workforce by providing training and support to employees, as discussed earlier.

Line management plays a crucial role in operational corporate resilience. They are responsible for implementing and enforcing resilience measures within their respective departments. Line managers are involved in identifying and assessing risks, developing and implementing business continuity plans, and ensuring that employees are trained and prepared to respond to disruptions. They also play a key role in communicating and coordinating response efforts during incidents or crises.

Subsystem VI – Brand Resilience

Corporate brand resilience refers to a company’s ability to withstand and recover from various challenges, crises, or negative events without significant damage to its brand reputation. It involves implementing measures to protect the brand and ensure its long-term sustainability. Here are some key measures to protect the brand:

• Crisis management plan: This plan should include clear protocols, designated crisis management teams, and predefined communication strategies to minimise the impact on the brand. An example would be Johnson & Johnson’s response during the Tylenol poisoning incident in 1982, where they swiftly recalled and reintroduced
  the product, demonstrating their commitment to consumer safety.
• Proactive communication: Maintain open and transparent communication with stakeholders, including customers, employees, investors, and the media to build trust and credibility. An example is Patagonia’s consistent communication on environmental sustainability and their initiatives to reduce their carbon footprint, which aligns with their brand values and resonates with their target audience.
• Strong corporate culture: Foster a culture that emphasises ethical behaviour, transparency, and accountability. This builds a foundation of trust among employees, which translates into consistent brand representation and reduced risk of internal issues impacting the brand⁶. The most popular example is Google’s corporate culture, highlighted by their mission statement, “to organise the world’s information and make it universally accessible and useful”. This culture has helped them maintain a positive image and attract top talent.
• Customer experience management: Prioritise customer satisfaction and loyalty by delivering exceptional customer experiences. Focus on delivering quality products and services, personalised interactions, and prompt resolution of customer issues to protect the brand’s reputation. A widely known example is that of Apple’s emphasis on user experience through innovative design, ease of use, and excellent customer service, which has contributed to their brand resilience, resulting in a loyal customer base.
• Social media monitoring: Actively monitor social media platforms and online channels to identify and address any negative sentiment or misinformation promptly. Engage with customers, respond to their feedback, and address their concerns to maintain a positive brand perception. For example, Starbucks’ effective social media presence allows them to quickly respond to customer complaints or negative comments, demonstrating their commitment to customer satisfaction.
• Diversified brand portfolio: Diversify the brand portfolio to mitigate risks associated with depending heavily on one product or service. This helps protect the overall brand reputation, even if one component faces challenges. An example is Unilever’s diverse brand portfolio, including Dove, Ben & Jerry’s, and Lipton, which allows them to weather market fluctuations and maintain a strong brand image across different consumer segments.

Conclusion

Yes, an organisation can prepare for adversity and become more resilient; it can be re-engineered to develop a culture of resilience. Here is a summary of some strategies and steps that should be taken:

Line management plays a crucial role in operational corporate resilience. They are responsible for implementing and enforcing resilience measures within their respective departments.

• Create an environment where values are shared and aligned with the objectives of the corporation.⁷
• Identify potential risks and vulnerabilities that the organisation may face. This can include natural disasters, economic downturns, cybersecurity threats, or supply chain disruptions.
• Create a detailed plan that outlines how the organisation will respond to and recover from adversity.
• Ensure that the organisation has diverse revenue streams, a skilled workforce, and a flexible supply chain.
• Establish partnerships and collaborations with other organisations, government agencies, and community stakeholders that will provide support and resources during times of adversity.
• Test and update the plan regularly, engage in exercises and drills to test the effectiveness of the contingency plan. Identify weaknesses and areas for improvement and update the plan accordingly.
• Learn from past experiences and analyse previous instances of adversity and learn from them.
• Lastly, foster a culture of resilience by nourishing a proactive and resilient mindset among employees. Encourage innovation, adaptability, and continuous learning.

By taking these steps, an organisation can enhance its preparedness and develop the ability to withstand and recover from adversity, ultimately becoming more resilient.

About the Authors

Dr Simon L. Dolan is full professor and researcher at Advantere School of Management (affiliated with Comillas, Duesto and Georgetown Universities). He is the former Future of Work Chair at ESADE Business School. He has published 85 books (in multiple languages) and over 150 articles in referees’ journals. He is also the cofounder and President of the Global Future of Work Foundation (www.globalfutureofwork.com). His work, consulting, and research is about values, leadership, coaching, stress management, and resilience, as well as issues connected to the future of work. He holds an MA and PhD from Carlson Graduate School of Management at the University of Minnesota. He was a former editor of cross-cultural management and member of the editorial board of half a dozen scientific journals. His full bio can be found at: www.simondolan.com

Dr Adnane Belout is an associate professor at the University of Montreal. In addition to his speciality in the management of human resources (PhD), he has developed expertise in the field of HR data analytics. Formerly, he specialised in the field of project management (MA). In addition, he is the Director General and founder of Le Groupe Canadien MDS, a consulting firm based in Montreal, which offers training services in French throughout the globe but with a focus on West Africa (www.groupemds.com).

Dr Jean-Luc Cerdin is a full professor of International Human Resource Management at ESSEC Business School, France. He researches, publishes, and consults in three primary areas: global mobility, human resource management in MNCs, and global career and talent management. He has contributed numerous articles to international top-tier professional and academic journals, such as the Journal of International Business Studies, the Journal of World Business, Human Relations and Human Resource Management. Additionally, he serves on several editorial boards for HRM and international business journals. He has been visiting professor in American Universities like Wharton and Rutgers, as well as leading business schools in Europe, such as ESADE in Barcelona, Spain.

Javier S. Casademunt is a consultant and the director of the Brazilian branch of the Global Future of Work Foundation (www.globalfutureofwork.com). He has served for many years as the director for Brazil, and academic collaborator of the Strategy and General Management Department at ESADE Business School. He is the founder and CEO of the Neuromentoring Institute of Florida. He is a visiting professor to several top business schools in Latin America, and an expert in the areas of leadership, mental health, resilience, and performance. He has more than 20 years of successful experience in managing, teaching, and consulting for companies, governments, and top leaders globally. His email address is javier@.javiercasademunt.com, and his website is www.javiercasademunt.com.

References

1. The authors are currently working on the development of an innovative tool designed to audit organisational resilience.

2. This section was inspired by the Deloitte report. The full report can be found at: https://www2.deloitte.com/us/en/insights/topics/strategy/characteristics-resilient-organizations.html

3. CXOs are high-level executives who focus on creating consistent, frictionless CXs that meet or exceed expectations across all customer touch points and at every stage of the customer journey – before, during, and after a sale is complete.

4. Much more on the effect of building trust can be found in: Dolan S.L. Brykman K. (2024) The Art and Science of Building Trust (forthcoming).

5. For more, read: Dolan S.L. (2023) De-Stress at Work. London. Routledge.

6. An example is the annual or biannual ethical assessment. The use of state-of-the-art audit tools is recommended. For instance: myDova.com

7. For more, see: Dolan S.L. (2020) The Secret of Coaching and Leading by Values. London. Routledge.

The post Towards the Building of Organisational Resilience: Uncovering the Key Features appeared first on The European Business Review.

As macro factors such as economic trends, public health, war, technology development and the environment continue to present unprecedented surprises and even shocks for organisations, the capability of resilience gains fundamental importance.

Resilience has many dimensions but a shorthand definition for it is that it is the ability to bounce back after unexpected shocks and disruptions; as well as to endure and even thrive in the face of uncertainty. 

Many dimensions are important for resilience: financial, operational, technological, reputational, and strategic. Each of these domains has its own requirements and imperatives and a failure in any of them can compromise the resilience of the whole enterprise.

Risk management is essential in all these areas. In operations, for example, companies want to accomplish a reliable supply chain as well as negotiating power over suppliers that comes from concentrating purchases with as few suppliers as possible.

A reliable supply chain, however, implies sufficient diversification of supplies to be able to avoid disruptions if a particular supplier cannot fulfill their orders; so, resilience here implies a delicate balancing act between negotiating power and diversification of sources.

Financial risk management includes avoiding overly ambitious corporate actions, such as an acquisition where a large premium over the market value of the firm is paid, an acquisition in an unrelated field or one where synergies are overestimated (as is usually the case).

It also includes prudent investment of free cash flow and a robust governance process of any substantial expenditure or corporate-level action.

While risk management no doubt contributes to resilience, it is by no means the be-all and end-all. Risk management is more defensive in nature, focusing on creating internal conditions and governance processes where risk can be minimised.

Building resilience on the other hand implies an active stance and purposeful strategic actions, such as building a competitive advantage rooted in capabilities and resources that will endure in the face of shocks and disruptions.

For example, the budget airline Ryanair continues to achieve levels of profitability that are unheard of in the industry and is on track with its extremely ambitious growth plan.

While COVID-19 decimated aviation demand for around 18 months, Ryanair has rebounded even stronger, on the way to achieving its ambitious growth targets with a delay of only around two years as compared to the timescale of its original, pre-COVID-19 plans.

A comparison of operational costs between Ryanair and its competitors reveals that only the Irish carrier has managed to return to its pre-COVID-19 efficiency levels, whereas its competitors still have to contend with higher costs because of actions they had to take during the crisis.

Ryanair has built the highest levels of efficiency in the industry, as well as agility as strategic capabilities that are the roots of its resilience.

In any crisis or disruption its competitors will have to pay a higher price than Ryanair to keep operating or to remain a going concern so that over time Ryanair can bounce back faster and endure a lot longer than competitors.

The Indian healthcare chain Narayana Health is another case in point. During COVID-19 the company was exemplary in its actions.

Avoiding profiteering from the crisis, it has provided vaccines at cost to millions of people, engaged in public awareness and education, and supported public health measures.

When most large healthcare chains in India reported record profits, Narayana Health reported losses during the same period. Yet, after the worst of COVID-19, its share prices rose from 650 rupees in August 2022 to 1,200 rupees in November 2023.

This occurred due to the combined effects of Narayana Health’s reputational, operational, and strategic resilience.

Reputationally, the company’s actions during COVID-19 only reinforced its purpose of providing affordable healthcare to the masses in a nation with immense structural deficiencies in healthcare.

Operationally, its robust supply chain with immense efficiency that derives from technological integration in the healthcare process as well as scale of delivery, supported the company’s actions during COVID-19 and enabled the company to bounce back when demand returned.

In terms of strategy, Narayana Health is perhaps the textbook example of ambidexterity, which is the ability to accomplish competing goals such as low cost and high levels of quality. Ambidexterity at this strategic level is fundamental to resilience since a shock will test competitors much more than it will test an ambidextrous organisation.

To be sure, resilience is not an appropriate descriptor for organisations that endure because of Government regulations erecting barriers to entry or to those that are bailed out by taxpayers’ funds, a commonplace event for financial institutions during recent crises.

Rather, resilience is a badge of leadership accomplishment reserved for organisations in competitive markets that build strategic capabilities through consistent and wise leadership and corporate actions.

In many ways, the road to sustainable competitive advantage through building such capabilities is a parallel road to building resilience.

Professor Loizos Heracleous teaches on the Warwick Executive Diploma in Strategic Leadership & Change at WBS, a part-time Executive Education programme taught at WBS London at The Shard. Find out more about how you can reach the next level of leadership and give your organisation the strategic edge here.

The post How to Build a Resilient Organisation appeared first on The European Business Review.

Complex and messy problems are everywhere, not just in business, but in life more generally. Yet the way in which we face them is often to deny reality. As Mark Cole and John Higgins, who coined the term ‘myth of fixability’, say: “we live in a consequence free world, where solutions to all situations exist, where pills and modern medicine, technology, the market, new so-called ‘thought leadership’, and a battery of management techniques, will [all] be a deus ex machina (or deus ex McKinsey) stepping in to make everything better.” (2023: 111)^[1]

Think about the ease with which politicians of various kinds have over simplified and explained away the complexity of COVID or Brexit to assuage our anxiety, and their own. In organisations, leaders, still often gripped by the fallacy that heroic leadership is a viable approach, attempt to persuade their followers that all will be ok, even when their followers know that things are a little more complicated than they are being told.

The pressure to know what to do

An example of this is how organisations make decisions around the purchase of digital technology and the accompanying change. A friend of mine who works with organisations to help them with their digital strategies and resultant change once described to me that she noticed how often her exec clients would be making purchasing decisions worth millions of pounds for technology they simply did not understand. The embarrassment and potential shame of acknowledging that they did not understand all this ‘digital stuff’ meant they stayed quiet. The work my friend did was less around the tech, and more about dealing with anxiety and the group dynamic, with people too afraid to reveal what they did not know. To accept that you do not know what to do, that you do not have the answers, that how you imagine yourself to be and hope others see you, can be profoundly anxiety inducing.

It is in this context that the market for Silver Bullets flourishes: when faced with a challenge which we do not see a solution or answer to, it is far easier to edit out uncomfortable facets of reality and reach for the nearest gobbet of thought leadership, 2×2 model, fancy slide deck with the promise of answers or methodology that makes it all look so manageable.

Who wouldn’t want certain answers?

I Know I do. The things in my life and work that are messy, if someone offered me a quick fix or Silver Bullet, I’d snap it up. Unfortunately they do not exist, whether that be for digital transformation, culture, talent management or any of the many other messy organisational challenges. If they did, we’d all be buying the same book or hiring the same consultancy or lapping up the methodology that made things easy.  

This is where the myth of fixability comes into play: if we believe in that, life is a lot less discomforting. All of this raises a question.

What drives the need for certainty?

In my research for my new book No Silver Bullet, I asked interviewees for their thoughts on what drives this need for certainty. The answers were varied, with some clear patterns emerging, including:

• Expectations – those that are placed on leaders and which they place on themselves
• Pace – it is rare for leaders to say ‘we need to slow down’. The speed at which we are expected to perform heightens the need for answers, and quick ones
• Narratives around how leaders lead to be ‘great’– e.g. fast, decisive, confident, heroic, charismatic, etc.
• Laziness – because, yes, thinking more deeply requires effort
• Fear and anxiety – in this instance of failure, and what others might see or we might realize about ourselves. Add to that discomfort with ambiguity and uncertainty, fear of being ‘found out’ or ‘not good enough’, all underpinned by shame, or the potential thereof.
• Not being able to cope with not knowing – specifically around what to do, why things are happening, what will happen if I do/do not act, etc.
• Pleasing behaviour – parent/child dynamics are common in most organisations, and a pattern that shows up within that is of the need for some leaders to be liked, which turns into pleasing others whether employees or peers. One way to please is, of course, to find the solution to a problem everyone is worried about.
• Displacement – it is easier to make someone – or something – else responsible when things do not work. Like a Silver Bullet
• Mindset – if you view the world as inherently plannable or have a high need for precision and predictability, certain solutions are incredibly alluring.
• Cognitive overload – we simply can’t cope.

Rob Briner, Professor of Organisational Psychology at Queen Mary University London summed things up nicely:

• “Magical thinking, incentives and rewards for leaders, cognitive biases, lack of training in decision-making, limited accountability, few evaluations and ‘management theatre’ where being seen to be doing something is more important than what you actually do”.^[2]

The kicker

Given all of that, is it any wonder that the market for Silver Bullets is so strong and leaders are ripe to be sold to? Wishing something were true is not the same thing as it being so. The ways in which we make sense of and interact with the world around us, as it really is, is key. How to respond to this? No Silver Bullets on offer from me, rather some tentative suggestions:

1. Develop reflexivity – the ability to notice your own beliefs, judgments and practices and what influences these (e.g. psychological, social and systemic factors)
2. Cultivate a both/and mindset – when all around are asking for either/or, yes/no, or stop/start binary responses, getting comfy with not knowing requires the ability to see and hold nuanced positions.
3. Ask questions – especially when you are amid the unknown. That is place for sensing and responding, not heroic leadership.
4. Experiment – and be prepared to fail and learn. If you do not know what is going on or what to do, to expect to be right as a default it an absurdity

These are the antithesis of a mindset that believes in the myth of fixability, and ultimately far more likely to lead to positive change.

About the Author

Steve Hearsum is an experienced consultant, supervisor and developer of change practitioners, the founder of Edge + Stretch and the author of No Silver Bullet: Bursting the bubble of the organisational quick fix (out now). 

References

1. Cole, M. & Higgins, J. 2023. The Great Unheard at Work: Understanding voice and silence in organisations. Abingdon, Oxon & New York, NY: Routledge.
2. Email 17^th February 2024

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New rules of the game

The COVID-19 pandemic and the Russian invasion of Ukraine have accelerated the drivers of geopolitical change, entrenching the bipolar confrontation between the US and China, the reconfiguration of international supply chains, and the declining commitment to international law. An increased focus on sustainability and climate change, rising inequality within and across nations, and the dominance of big tech are rapidly shifting the global balance of power.

A McKinsey (2022) report indicated that geopolitical instability poses a threat to both domestic and global growth. An Edelman (2022) Trust Barometer Report indicated that 59 per cent of executives believe that responding to geopolitical issues is a top priority in business.

For multinational corporations, the impact a single event or policy shift can exert on their operations is magnified through a complex web of interrelated dependencies. The physical locations of premises, multi-faceted supply chains, geographically mobile workforces and cyber-connectivity have led to greater risk exposure emanating from the cross-border transfer of goods and currency exchange.

As the geopolitical landscape changes, so must the way in which risk leaders protect their businesses. A thorough understanding of the interlinked geopolitical risk drivers and their impacts provides a strong foundation for prevention and protection against them and is essential in order to maintain a competitive advantage.

Revising the corporate play book

With a changed operational environment, companies need to conduct business utilising new methodologies. The four ways organisations can manage elevated geopolitical risk are: abstain, play, insure, or mitigate.

Abstain. Companies can decide not to participate in cross-border business. That is a strategic choice depending on the nature of a firm’s business, its aspirations, and the degree of domestic and international competition. However, it is practically difficult to be isolated from the external environment. Autarky is painful. North Korea is a current example, and is hardly an economic tiger. Even relatively closed economies cannot avoid external problems. Coronavirus exemplifies the capacity for cross-border contagion. The same is true with climate change, technology, and regulation.

Play. Companies can decide to bear all the risk and take any potential loss in the pursuit of profit. Many oil majors take this approach because the scale of their global investments is so great that the cost of insuring is greater than the odds of a sizeable incident impacting more than a small fraction of their portfolio. Again, this depends on the nature of the business and the strategic appetite for unmitigated risk. Profits may be huge one year, but collapse subsequently if external exposures turn bad. Shareholders may like the former but not the latter.

Insure. Companies can pay for insurance, be it specific political risk insurance or a guarantee from either an export credit agency or a supplier. Obviously, these carry a significant cost, particularly for higher-risk territories, so the decision is a commercial trade-off. Less risk, but less return.

Mitigate. Companies can explore ways to minimise risk. There are various means to do this, depending on the product, the wider market, the term, and the quantum.
For a bank, the choice of product and its term is key. Market risk is the shortest-term product, applicable to, say, exchange rate or interest rate trading, though more complex products have longer tenors and can stray into risky territory. Bonds are also perceived as being a less risky form of cross-border investment.

Trade credit is the next-shortest-term product and is at the least risky end of the scale. Some deals can be 3-5 years in tenor, though most tend to be 364 days or less. Typically, the fact that the credit is secured on the goods being traded limits the risk. Failure to pay for a consignment means the next one is unlikely to be forthcoming. Risk-averse lenders may only deal in strategically important trade, such as food or key industrial inputs essential to an economy’s performance, on the basis that these are most likely to be fully repaid.

Project finance may be seen as more risky due to its longer tenor, but the ability to structure the terms of the loan and potentially to secure it against a revenue stream massively reduces the risk. This is the riskiest product on tenor grounds, along with any other lending over five years. For instance, lending to develop a copper mine could be structured to link repayments to the future income stream. But what if the commodity price plummets? Or production fails for some technical reason? Or technology changes? Or the mine floods? Or is expropriated? Or its operating licence term changes?

Beyond the choice of product, options such as government guarantee or insurance exist to mitigate the risk of default – or structuring a line to secure repayment against future income streams. But these are costly and detract from the profitability of the deal. In addition, there is a risk that a proportion – sizeable or otherwise – of the deal might not be repaid, again impacting the lender’s profit – and balance sheet.

A broader financial perspective is necessary. For example, when a lender operates in a specific country, key issues to be considered within its agreed risk appetite would be both ability (economic) and willingness (political) to repay a loan – or bond, or trade credit line, or project investment.

In essence, companies need to reevaluate and refine their approaches and enhance their business intelligence in order to improve the chances of operational success.

Hurdling a higher bar

A major conundrum is that data input to traditional models is, by definition, backward-looking, but risk rating has to be forward-looking. Thus, an important question arises: how can this dichotomy be reconciled, given that the future is not necessarily like the past?

There are multiple factors that need to be carefully weighed up by corporations. Here are just a few examples:

Pandemic. There are lessons that can be learned from history. Coronavirus was a new development, but the 2003 SARS outbreak carried similarities that can be extrapolated, especially as the origin was similar geographically.

Cybersecurity. A new threat such as cybersecurity has limited past comparators. Arguably, IPR theft has some parallels, but that tends to be company-specific and sector-specific, which contains its impact. By contrast, cyber-threats are potentially economy-wide, the attack on Colonial Pipeline being a case in point. In these circumstances, the quality of corporate governance is crucial. Is the firm regulated? If it is, is the regulator credible and effective? If the answers are yes, it can be assumed that the regulated entities have a robust business model. Very few businesses could fully insulate themselves from a sophisticated cyberattack. Most companies would rely on the public infrastructure protections, in the case of the UK stemming from Government Communications Headquarters (GCHQ).

Climate change. Environmental shifts are another evolving risk factor. Ten years ago, only obviously vulnerable countries such as Bangladesh or the Maldives (flooding risk from rising sea levels) would have been identified. Now, climate change is a global threat impacting even developed economies such as Australia (fires) or parts of the UK (floods and fires). As a contrast, the cases of Australia and Brazil, which also suffered from forest fires, show that political risk and infrastructure matter. Australia’s fires were too extensive even for its relatively advanced prevention systems, although political choices by the current administration did limit the preventive actions that could have limited the spread of the flames. Brazil, by contrast, made a deliberate political decision to cultivate the rainforest with scant regard for the climatic consequences of destroying valuable rainforest that absorbed damaging carbons. Traditional political risk drivers should have differentiated between the two in this example.

Supply chain. One crucial development that does complicate geopolitical risk assessment is supply chains. Truly global supply chains developed after the Cold War and have evolved into worldwide interconnected supply-and-demand networks with profound interdependencies, comprising vastly complex operations and with greater exposure to the vulnerabilities of every country and manufacturer in the process.

Multipolarity. The transition to a multipolar world has heightened competition and mistrust between political leaders. The increasing use of economic weapons such as tariffs and sanctions for geopolitical leverage impacts the viability of business operations in countries around the world. The withdrawal of many Western companies from Russia and the relocation of financial institutions from Hong Kong to Singapore are two such examples.

Given the diversity and depth of these issues, a heightened level of intelligence, focus, and operational engagement is necessary.

Winning the geopolitical game

In today’s environment, three strategic imperatives provide the foundation for corporate geopolitical success.

Paradigm shift. There is a need to embrace lateral thinking in order to find proxy measures. Companies should know the history of a country and the world. The traditional inputs remain relevant to current geopolitical risk assessment, but they are no longer sufficient. Increasingly more survey evidence is developing, and that typically offers a more forward-looking perspective. Speed of data release and quality of economic data are also improving, making ratings more timely and realistic – as long as the potential for logic override exists. For instance, some countries routinely exaggerate or understate key data, China being an example of the former. It routinely releases its GDP data immediately at the end of an assessment period, and sometimes even before. The UK typically takes some weeks, with many revisions following that can massively change the immediate assessment once the full facts become available. Hence the importance of the data-quality criterion in the model inputs.

Unconventional business models. Flexibility matters in model-building, and greater model power and accuracy do mean that ratings are becoming more reflective of the real risk. Moreover, as the timeliness and spread of news information improve with technology, the degree of accuracy also improves.

Exceptional intelligence. Geopolitical risk data analytics is a subset of quantitative risk assessment. It is needed because the speed and complexity of geopolitical change is increasing and traditional political risk analysis is unable to keep up. It differs from traditional political risk models, because it uses a new generation of political data sets, which creates a higher spatial and temporal resolution of geopolitical risk data. The enhanced granularity in geopolitical risk assessment offered by data analytics creates new insights and perspectives on geopolitical risk that enable new risk mitigation strategies to be developed.

The world has evolved significantly in recent years, stemming from key geopolitical events. The rules of business have changed and the geopolitical playing field has been transformed. Complexity is at an unprecedented level. As a result, companies need to rethink their operations and elevate their game in order to find new strategic victories.

This article was originally published on 6 November 2022.

About the Authors

Dr Elizabeth Stephens is an investment and country risk advisor and managing director of Geopolitical Risk Advisory, a tech company that uses AI and data analytics to map geopolitical instability. She is a regular conference speaker and visiting lecturer at London and Henley Business Schools.

Dr J. Mark Munoz is a Full Professor of Management at Millikin University, a former visiting fellow at Harvard University and editor of the books Handbook on the Geopolitics of Business, Advances in Geoeconomics, and Global Business Intelligence.

References

1. Edelman (2022). “2022 Edelman Trust Barometer Report”. Accessed 8 Aug 2022. Available at: https://www.edelman.com/trust/2022-trust-barometer/special-report-geopolitical-business
2. McKinsey (2022). “Economic conditions outlook, June 2022”. Accessed 8 Aug 2022. Available at: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/economic-conditions-outlook-2022

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How do businesses prepare for the next virus or major upheaval that disrupts supply chains and operations like the pandemic?

We saw how the sudden global eruption of the coronavirus forced businesses to facilitate remote working by millions of office workers and adjust to complete shutdowns of parts of the supply chain.

This abrupt shift in working patterns is here for the long term. A McKinsey global survey of senior executives in large corporations found that nine-in-ten intend on continuing with hybrid working beyond the pandemic. Perhaps half of all white-collar employees now work part of the time from home as a result of the coronavirus pandemic. 

Hybrid working has added hugely to IT infrastructure complexity. And that infrastructure is now under greater strain as organisations diversify supply chains to mitigate risk from further Covid lockdowns, bottlenecks in the shipping industry and the possibility of future pandemics and new viruses. The Russian invasion of Ukraine has also hugely disrupted supply lines for thousands of businesses, reminding everyone of how quickly major events unfold.

Supporting the use of SaaS

The move to hybrid working was rapid and only possible because of advanced Software-as-a-Service (SaaS) business applications and the adoption of collaboration tools such as Slack, Dropbox, Zapier and Trello. But all these applications depend on fast, high-bandwidth networks which are resilient, available, and secure. IT infrastructure must adapt to keep pace with application development and inject greater agility into the organisation. 

The challenge for businesses is how to optimise SaaS, multi-cloud services and distributed applications and secure the vastly expanded networks that serve their hybrid workforces. This is necessary to make them more resilient and adaptable. In addition, businesses must be ready to embrace new technology-led models, such as Industry 4.0 and the rapid growth of the Internet of Things (IoT) as machines communicate intelligently with one another across 5G and superfast fibre. They must adopt artificial intelligence (AI) applications and maximise new patterns of software delivery. 

The edge is the foundation of future resilience

All these dramatic developments have one thing in common – businesses can only fully optimise them through the adoption of the next major evolution of infrastructure – edge computing. Edge computing is the confluence of cloud and physical data, which exists wherever the digital and physical worlds intersect. It enables data to be collected, generated, and processed close to the end-user to create new value. 

Whereas it would previously have been impossible to sustain high-speed data transfers necessary for applications using AI in many regions, edge data centres can now run analytics locally once models have been trained on masses of data in the public cloud. 

Edge works in tandem with high-speed, high-capacity fibre and 5G mobile connectivity. Businesses need low latency and high-capacity connectivity to support multi-cloud strategies and hybrid working and to enable full deployment of advanced SaaS and security applications. Analysts at consulting organisation Gartner have found business collaboration solutions show reduced performance at latency above 25ms.  

This all calls for edge since distance adds to latency. While the centralised cloud models of AWS and Azure and so on offer great computing advantages, organisations outside metropolitan areas will run into significant network latency problems. Industry 4.0 applications, need computing power as close to the devices generating and using the data as possible.

The advent of edge computing enables businesses to use and supply new applications and services from all over the world, significantly increasing diversification of supply and resilience. Vendors can orchestrate the network functions and computational infrastructure needed for secure delivery to their end consumers. 

We can already see enterprise use cases supported by 5G-enabled edge computing. Remote monitoring and diagnostics in healthcare along with 3D medical imaging will be possible. In manufacturing, automated, short-run, high-precision customisation of high complexity will be possible in new locations. In port management and logistics, edge computing stands to deliver far higher levels of automation and efficiency across expansive campuses and entire supply chains.

This is taking shape already as the hyperscalers team up with communications service providers. In Italy, the port operator at Livorno is using a private Ericsson 5G New Radio (NR) network with sensors on forklift trucks, LIDAR, cameras, and mobile applications to streamline cargo handling operations using digital twin technology. Telefonica is also, collaborating with enterprise cellular 4G/5G platform Pente Networks, and last year, Telefonica Germany formed partnerships with AWS and Ericsson to enable fast integration of new applications and reduce costs. 

These are localised set-ups, but for all enterprises, edge computing will deliver greater flexibility and agility, new models of business and vastly higher levels of performance. Established edge providers, with their networks of data centres, have tools that give customers the ability to manage all their cloud infrastructure from one platform. This is an important development in infrastructure optimisation for enterprise IT departments. Many increasingly see hybrid infrastructure as their best way forward, combining the cost, flexibility, and innovation of the major cloud vendors with retention of on-premise infrastructure for sensitive data or critical applications that are not cloud-compatible.

Improved network security

The edge also addresses many of the security concerns that have arisen from hybrid working. The extended attack surface that may include hundreds of poorly secured and unencrypted connections to employees’ homes, could offer criminals access to a corporate network.

Applying security policies to each remote worker can be complex and costly, and achieving visibility over applications is difficult. The edge, however, enables “application-aware networks” that allow businesses to understand and fix application problems much faster. SD-WAN technology (software-defined networking in a wide area network) is the cornerstone of this approach, giving visibility over applications so organisations control and direct traffic intelligently and securely from a central location. Businesses can configure multiple devices at the push of a button. Rolling out new applications becomes quicker and less costly across multiple sites. 

The answer in a time of uncertainty

Edge computing takes cloud access and transforms it for the new age of uncertainty. It is how enterprises with hybrid work patterns and hybrid IT infrastructure will become more resilient and better able to adapt to what would once have seemed improbable events. It is a new approach that puts great power in the hands of businesses, enabling them to use new applications and AI to futureproof themselves against future changes and shocks while transforming their ability to change business models and generate new revenues.

This article was originally published on 16 July 2022.

About the Author

Simon Michie joined Pulsant in early 2020 as Chief Technology Officer and has overall strategic responsibility for Pulsant’s product and service portfolio and technology roadmap.

Responsible for enhancing and leading Pulsant’s technological vision and product strategy, Simon works closely with teams across the business to develop and standardise Pulsant’s infrastructure services portfolio and improve its service experience.

Simon has three decades of experience in the technology sector, starting out his career in sales. He then moved into a succession of technical and then managerial roles before co-founding Centric Networks. This ultimately led to a five-year tenure as CTO for Redcentric where he modernised the company’s network and cloud offerings.

The post Preparing for the Next Virus – Pandemic Lessons for IT Infrastructure appeared first on The European Business Review.

Step 1: Evacuate Safely and Swiftly

The first moments after an explosion are critical. If you’re in immediate danger, evacuate the area as quickly as possible. Remember to stay calm; panic can lead to injury. Alert others around you, but don’t wait for those who aren’t responding—your safety is paramount. Once you’re in a safe location, check yourself and others for injuries and seek medical attention if necessary.

Step 2: Follow Official Instructions

Authorities will be working hard to manage the situation. Keep an ear out for instructions from emergency responders or local officials. Whether it’s a shelter-in-place order or an evacuation directive, following these guidelines is vital for your safety. They have the most up-to-date information on the risks and how best to avoid them.

Step 3: Stay Informed

In today’s connected world, staying updated is easier than ever. Tune into local news stations, check social media updates from reliable sources, and sign up for community alert systems if available. Knowledge is power, and in this case, it could be lifesaving.

Step 4: Protect Your Health

Exposure to hazardous chemicals is a serious concern after a plant explosion. If you suspect you’ve been exposed, remove any contaminated clothing and wash your skin thoroughly. Seek medical attention even if you don’t have visible injuries—some symptoms can take time to appear.

Step 5: Document Everything

Once you’re safe, start documenting everything related to the explosion. Take photos of any injuries or property damage if you can do so safely. Write down your account of events while they’re fresh in your mind. This information may be crucial if you need to seek compensation later on.

Step 6: Reach Out for Support

You don’t have to go through this alone. Reach out to friends and family for support. Community organizations may also offer assistance with basic needs like food, shelter, or counseling. Remember, it’s okay to ask for help during difficult times.

Step 7: Consult with a Plant Explosion Lawyer

Navigating the aftermath of an explosion can be complex, especially when it comes to legal matters. Consulting with a plant explosion lawyer can provide clarity and help protect your rights. They’ll understand what you’re going through and can guide you through the process of seeking justice and compensation.

Additional Considerations

Insurance Matters

Review your insurance policies to understand what coverage you have. Contact your insurance company as soon as possible to report any damages or losses.

Community Resources

Look into local resources that might be available to those affected by the plant explosion. This could include temporary housing, financial assistance, or medical care programs.

Long-Term Health Monitoring

Some health effects from chemical exposure may take years to manifest. Stay vigilant about your health and consider long-term monitoring if recommended by a healthcare professional.

Emotional Healing

Don’t neglect your emotional well-being. Traumatic events can have lasting psychological impacts. Seek professional counseling if you’re struggling to cope.

In times of crisis, it’s natural to feel lost or helpless. But remember, taking these steps can empower you to navigate through the aftermath with strength and resilience. For more guidance and support tailored specifically to your situation, visit Joe Zaid & Associates, where compassion meets legal expertise.

The road ahead may be long and challenging, but with careful action and the right support, you can emerge stronger on the other side. Stay safe, Texas.

The post 7 Key Steps for Minimizing Risk in the Event of a Plant Explosion appeared first on The European Business Review.

The business world is facing an ever-growing challenge: striking the balance between optimising employee productivity levels and providing job satisfaction. Here we explore workplace productivity and effective strategies to counteract challenges among remote workers in particular. 

With recent waves of “The Great Resignation” and “Quiet Quitting,” companies are grappling with challenges that affect workplace productivity, as never before. These issues come at a time when organisations are having industry-wide mass layoffs. 

Figures from Europe underpin these trends. In Q2 and Q3 2022, the UK saw historically high numbers of resignations, with more than 365,000 and 442,000 people leaving their jobs, respectively. A third of all German companies is experiencing a shortage of skilled workers due to The Great Resignation, with Gallup’s annual workplace study showing a record number of employees looking for new jobs, and 4 in 10 saying they would stop working if they could afford it. In France, the number of resignations reached a historically high level at the end of 2021 and beginning of 2022, with nearly 520,000 resignations per quarter, including 470,000 from permanent contracts.

Against this backdrop, the need for a content, productive workforce is higher than ever. Here are some actionable steps to increase workplace success while keeping employees engaged and satisfied:

Training, progression and autonomy

The argument for workers having a satisfactory work-life balance through allowing remote work carries weight insofar as employees have increased autonomy over their time and also avoid commutes and distractions that come with an in-workplace environment. With fewer interruptions, they can concentrate on producing high quality work to meet company objectives. 

It may be tempting and inevitable to give employees additional tasks (particularly if the workforce is shrinking) without the additional change in title or pay to reflect the increase in responsibility. In other words, a Quiet Promotion. Additional tasks should be aligned with each employee’s career progression plans and extra responsibilities, and achievements should be compensated. This recognition helps communicate to employees that their input and productivity are valued, and their efforts reap tangible rewards. Here, training, progression, and autonomy are part of creating a positive work environment.

Unlocking an employee’s digital experience

A remote employee’s digital experience —and improving it — is the key to unlocking staff productivity when working outside the office. Digital employee experience refers to the overall experience that employees have while using digital tools and technologies in the workplace. 

Our research on workplace productivity shows that companies offering a poor digital experience can lose nearly one hour per week per employee through IT downtime alone. There are certain actions that HR teams, together with IT teams, can implement to help employees get the best out of their remote workplaces. 

Technology is the first critical place to start as that is the interface through which an employee accesses their workplace. Fundamentals include ensuring that employees have the right technology (hardware and software) for their roles (and know how to use it) and empowering employees to report tech issues as soon as they occur. These factors are the foundation of pain-free remote working. 

Not only do many employees feel hindered by their workplace technology, but IT teams also are frustrated by a lack of visibility into how and when issues occur. A proactive IT plan helps teams to respond to IT issues so that remote employees are not stuck in queues, holding support tickets, trying unsuccessful fixes, or just ignoring the tech problem — all while losing productivity. 

Measuring digital experience

What’s next? While giving employees and teams the resources and autonomy to carry out their roles remotely, organisations do need to measure workplace productivity accurately to ensure that teams are performing at their best, and also to troubleshoot when productivity is not at expected levels. 

Employee digital experiences need to be measurable, without acting as big brother, rather than being based on assumptions, directly monitoring what users are doing, and in the worst case, just looking at user reported tickets. We know that nearly 40% of digital issues aren’t even reported.  

When measuring overall productivity of an organisation and ROI, granularity is key. Data should be available to understand costs of groups, for example, of remote workers, specific departments or technology splits, such as Macbooks and PCs. Moreover, results should be customised to provide numbers that denote, in monetary terms, how much losses in productivity are costing a business overall.

Systems like ours gather information from up to 10,000 data points every 15 seconds to help companies build and customise a 360° view of their digital footprint.

Action data and findings on productivity shortfalls

Armed with data that highlights which technology implementations are negatively affecting  productivity, IT teams can investigate further to reveal what is causing an enterprise’s digital health score to drop and productivity costs to rise. 

The remote worker may not consider the impact issues such as latency, memory, or disk space can have on an organisation’s digital health and bottom line; therefore, they may unwittingly accept these issues as the norm and fail to report them with the mindset of “too much hassle” or “enlisting IT support won’t make that much difference”. 

To counteract this failure to recognise or report issues, large-scale data collection combined with automated issue discovery can enable IT and HR leaders to understand the health of technology deployed and prioritise improvements that will ultimately affect employee experience and productivity. 

In summary, companies can help prevent “The Great Resignation” at their organisations by increasing productivity while keeping employees from being frustrated by their digital experience. This can be done through employee training and autonomy, improving the digital experience, and accurately measuring productivity to address shortcomings. Employers must also work to understand why productivity is low and address employee concerns.

This article was originally published on 7 May 2023.

About the Author

Elise Carmichael is the Chief Technology Officer of Lakeside Software. She is responsible for building and delivering the next generation of Digital Employee Experience solutions. She has over 20 years of experience working with enterprise organisations on high-tech, big data, and machine learning-based products. Before joining Lakeside, Elise held senior technology and product leadership roles at Functionize, Tricentis, QASymphony, and Mobiquity throughout the last 10 years.

Elise founded a non-profit in Florida to encourage more women to enter and stay employed in high-technology fields. She studied Computer Science and Music at The University of North Carolina at Chapel Hill. 

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Winter weather is unpredictable, but you can assume that delays will occur every year. Preparing for winter delays is a way to get ahead of supply chain problems and keep your customers happy. Keep reading to learn more about what to expect this winter and how to combat it. 

Winter’s Impact on Supply Chain Delays

Depending on where your business operates, weather can have a variety of impacts on your company’s functionality. For those that operate under winter conditions, it’s inevitable that you’ll come across supply chain delays. 

“Every winter, businesses encounter issues with equipment failing and needing updating, people calling out because their cars are snowed in, and roads being too dangerous to drive on. It’s not something that is always avoidable, but there are ways around these issues to avoid catastrophe,” explains Lioran Pinchevski, Founder and CEO of Finaloop who specializes in ecommerce accounting software. 

How you go about preparing for these delays and what countermeasures you take while they’re occurring can greatly impact your business’s relationship with customers. Staying on top of potential supply chain delays can help keep your company afloat. 

Extreme Weather

When extreme weather occurs, functionality across all kinds of businesses drops. Whether it’s the lack of lumber due to wildfires or extreme freezes that make driving impossible, it has a direct impact on a variety of supply chains. 

“These [effects of climate change] are [an] enormous stress to many supply chains of companies and not just companies that are making physical products but in finance and services,” John Sterman, professor of management at MIT’s Sloan School of Management, says.

Extreme weather directly impacts employees and can prohibit them from working. It can also cause damage to facilities where your business functions and create delays in getting your products or services into the hands of customers. 

Transportation Delays

When winter hits, it can take more time to travel from location to location, and more travelers are on the roads. Especially with the influx of transporting holiday items and gifts, more cars on the road with worse weather conditions is a pairing that’s bound to create a backup.

“Delays in transportation can start as early as October, even before the weather gets bad. Holiday shipments begin pouring in early as businesses stock up on various items, so preparing for winter storms and icy road conditions can help during peak shipping times,” shares Justin Rapoport, Co-Founder of TruHeight.

With more people on the roads, driving carefully to avoid bad conditions and giving yourself more time to ensure that all of your materials and parts may help you avoid supply chain delays.

Flu Season

Winter weather also brings colds and viruses. Beyond weather-related traffic delays, you may experience an uptick in employees calling out sick.

“Every year, there is a spike in sick days right around the time when the weather is bad — and the holiday season is around the corner. It’s like everything bad happens all at once, and businesses take the brunt of the damage,” laments Maggie Brown, Founder and CEO of Recess Pickleball.

You can mitigate sick day-related delays by hiring additional seasonal staffers, allowing remote work, and encouraging health-conscious behavior in the office. 

Other Supply Chain Disruptions To Consider

Winter weather can be disruptive, but you have to be prepared for all kinds of disruptions during peak seasons. During the winter months, there is often a spike in cyber attacks that can disrupt how your business functions.

“On top of the weather and sickness, the holiday season brings out the worst in hackers. Not only does the company have to somehow prepare for unpredictable weather conditions, but they have to protect their business from online dangers,” explains Max Schwartzapfel, CMO of Schwartzapfel Lawyers.

Luckily, not everyone will be hacked during the winter months, but it’s not something to take lightly. Businesses are simply at a higher risk when operating during peak busy season.

Ways To Handle Supply Chain Delays This Winter

Preparation is key when it comes to the winter months and keeping your business running. While you can’t control the weather, you can try your best to stay prepared. 

“Problems in the supply chain caused by fire, bad weather, or other natural disasters are the norm for those who manage supply chains,” says Kristin Dziczek, policy advisor at the Fed Reserve of Chicago. 

People who manage supply chains are always prepared to make changes throughout the winter season. Every year, you should look through last year’s reports on issues your business had, the success it had, and any decisions you made that curbed winter delays. 

Monitor the Weather

It may seem obvious, but monitoring the weather is one way to avoid supply chain delays this winter season. If you are aware of extreme weather coming up, you may want to avoid shipping out items until it passes, or push them out before the weather hits. 

“Have a team member who checks the weather updates daily. They can keep an eye on winter storms, flurries, and blitzes so that the drivers can stay out of harm’s way,” advises Jonathan Zacharias, Founder of GR0.

Avoiding the roads when there could be dangerous conditions keeps the drivers safe and the products viable. If there is a delay, equipment freezes, or products are damaged as a result of the weather, it takes more work to replenish those materials than it does if your business waits. 

Build Back-Up Inventory

Leading up to winter, it may be a wise idea to build a surplus of goods. In case of an emergency or if products do become damaged, having extra on hand can limit the amount of time your business needs to get up and running. 

“Some businesses’ workers will put in overtime in the weeks leading up to the winter months to help boost inventory and check equipment so that it’s functioning properly. They know that there is the possibility for products to be damaged and equipment to malfunction – it always happens around the busiest time of the year!” explains Shaunak Amin, CEO and Co-Founder of SwagMagic.

If you’re able to create extra supplies for the winter, you won’t have to worry about not having enough product for your customers when delays happen.

Identify Potential Risks

Before winter arrives, you need to have a plan in place for disruptions. If you’re able to identify the risks you could come across, you’ll be prepared if they do arise.  

“Weather is always a potential risk, but inflation, a global pandemic, or sickness can’t always be predicted. Keep in mind that anything could happen in your business, and coming up with even the shortest of plans on how to manage these problems can help you to manage potential risks,” says Asker A Ahmed, Director of iProcess Global Research.

Have a plan in place for anything that could cause you a delay. In this scenario, there’s no such thing as being too prepared!

Diversify Your Suppliers

You can’t rely on just one supplier to help you during the busiest time of the year. If your only supplier suffers a supply chain issue on their end, it will have a direct impact on your own business. 

“During the winter, businesses often take on a few extra suppliers. This ensures that the company is able to access all of the products that are needed to keep running,” states Miles Beckett, Co-Founder and CEO of Flossy. “Anyone can be hit by delays, so you can’t rely on just one vendor to help you function.”

When you have products coming in from different suppliers, your business doesn’t have to suffer if one supplier experiences delays.

Manage Your Time 

Winter delays should be expected. Because of this, your business should be well prepared and keep to a specific schedule. 

“As soon as November rolls around, businesses are put in high drive. Preparation for delays starts then so that there are as few issues as possible throughout the height of the severe weather. If you don’t manage your time well, you will fall behind,” cautions Maegan Griffin, Founder, CEO and nurse practitioner at Skin Pharm.

Keeping a strict schedule and working overtime may be necessary during a bad winter. Falling behind only lowers business morale and causes stress among your employees.

Communicate With Your Customers

Your customers are the ones who rely on your readiness to handle winter weather and supply chain delays. They aren’t always privy to the same information that you are given, so it’s important to pass down the news of these kinds of delays effectively. 

“When the customers are unhappy, it doesn’t matter how much work you put in to curb the delays. Communication is key. They want to know that the business they are purchasing from has their back and respects their needs. Sending out emails and notifying your customers when there is a delay can help to keep them satisfied and updated,” says Saad Alam, CEO and Co-Founder of Hone Health.

Setting up newsletters for your customers or reaching out directly improves the relationship that you have with them and can help you from losing money. 

Don’t Let The Winter Stop Your Business From Thriving

Winter can feel long and tough, but by taking these precautions, you don’t have to think about how delays will affect you. Keeping up with the weather, making necessary changes during peak season, and constantly improving the relationships that you build with your customers will help you to have a smooth and successful winter season!

The post How To Handle Winter Supply Chain Delays Without Losing Customers appeared first on The European Business Review.

Disasters in numbers: approximately 274 million people needed humanitarian assistance and protection in 2022, with additional 17.7 million people in need due to the war in Ukraine. Displacements show no sign of slowing as hundreds of millions of people are without shelter, food, health services and education, surviving from crisis to the crisis caused either by war, natural disasters, famine or disease outbreaks. 

During the largest global food crisis in modern history, the resilience and reactivity of existing systems keep getting tested by exponential requests for humanitarian aid. Not to mention human-induced climate change, which resulted in almost a double number of disasters in the last 20 years, directly affecting humanity and the environment worldwide and leaving millions without needed humanitarian aid.

Humanitarian aid is emergency relief to people in need, which safeguards lives, alleviates suffering and protects human dignity in all phases of emergency management: mitigation, preparedness, response and recovery. Humanitarian logistics is defined as ‘processes and systems involved in mobilizing people, resources, skills and knowledge to help vulnerable people affected by natural disasters and complex emergencies’. As such, it requires different actors to operate together and effectively coordinate aid actions with maximized time efficiency and minimized costs.

Successful humanitarian crisis management needs agility and adaptability to provide quality and fast responses to affected communities and places of a disaster. Humanitarian aid operations demand an effective humanitarian supply chain management strategy and successful execution, often with a multilateral approach that involves two-sided flow of supplies, information and resources between agencies, organizations and distribution centres to reach victims and affected area.

Existing infrastructures are often challenged by the pressure to process large amounts of data quickly and accurately and sometimes handle an unexpected influx of requests. Overloaded systems and operations often struggle to meet the demands for the fast delivery of the humanitarian response – with demands skyrocketing, and the pace will be impossible to meet.

Intelligent automation solutions can reshape humanitarian crisis management, resulting in faster supply distribution and a swifter response. Unlocking automation’s full potential, primarily Robotic Process Automation (RPA) and Intelligent Automation (IA), respectively, could benefit not just economies, but also development and humanitarian actors globally. Automation is a game changer that could increase the resilience of systems and actors in charge of humanitarian aid, optimize humanitarian aid processes and transform humanitarian crisis management as we know it.

The Role of Automation in Responding to Humanitarian Crises

Intelligent automation enables the sustainable transformation of humanitarian aid operations by increasing the system’s resilience to increased demand, unpredicted challenges and lack of speed through resources and processes optimization and error-free execution. While RPA can be used for data entry, processing reports, claims and inquiries, intelligent automation includes AI capabilities which help organizations automate and streamline more complex processes. 

More concretely, automation could help tackle crucial elements of humanitarian crisis management, such as:

• disaster mitigation,
• human resources/recruitment and onboarding, 
• finance and accounting, 
• faster and more detailed responsiveness,
• supply chain operations synchronization, 
• systematical allocation of resources,
• AI document processing,
• data collection and reporting. 

The disaster relief supply chain comprises three primary operations: supply acquisition and procurement, pre-positioning, warehousing, and transportation. All three primary operations require detailed administration, where a faster front-end interface is needed for data entry, including streamlining screening processes and quicker and correct processing of digital paperwork so that relief supplies are effectively managed and distributed. 

This is where automation enhances the relief supply chain’s effectiveness and efficiency by speeding up data sharing and synchronization between systems and organizations directly involved in the humanitarian supply chain. Furthermore, intelligent automation capabilities can help interconnect various stakeholders, storage centres, and distribution points to accelerate the distribution of resources, donations, and supplies to humanitarian aid receivers. Additionally, a precise and systematical allocation of resources is guaranteed instead of an impulsive one, even after the first wave of the emergency recovery. 

Accelerating Humanitarian Aid Objectives with Automation 

Various examples globally have shown that digital transformation can indeed help increase access to relief services and support central and local authorities manage the crisis more effectively and efficiently. Furthermore, automation has already proven as a trustworthy agent of humanitarian aid operations transformation by bringing concrete results and practical solutions.

One such example implies the use of intelligent automation, which can reduce the administrative burden associated with refugee crisis management and ease access for those in need by streamlining processes, inquiries, and various requests for service delivery. For example, the customized software bot ‘Telegram for Humanity’ automates thousands of manual requests incoming from Ukrainian refugees. As a result, automation increases aid delivery in volume, speed and accuracy, saving almost 200 hours of manual processing by volunteers each week.

Automation in advanced food manufacturing for humanitarian aid produces nutritious food for a lower price, ready for immediate delivery. Automated manufacturing of nutritious food has saved more than 11 million lives in 55 countries by lowering the cost of humanitarian efforts and reaching the more affected population, especially children.

Centralized automated technology solution ‘Last Mile Mobile Solutions’ strengthens ‘efficiency, effectiveness and accountability in humanitarian service delivery’ by improving remote data collection, including registration and verification, management of aid recipients, distribution planning, management, monitoring and reporting. Automated processes resulted in at least 50% faster registration of aid recipients, a 30% reduction in project-related budgetary costs for manual activities, a 40% reduction in distribution staff and a corresponding reduction in travel costs, and more. In addition, digitalized data allowed automated processes to rapidly speed up the critical stage of humanitarian aid delivery – the distribution of supplies to affected people.

The digital transformation of the United Nations Volunteers (UNV) programme enabled the use of software robotics to increase compliance, consistency, and productivity through Robotic Process Automation (RPA). UiPath’s automation for UNV accelerated routine and repetitive tasks by increasing the data quality and efficiency of data entry related to the contract management and assignments of UN Volunteers, resulting in saved ‘125 (8-hour) person days, working in the background around the clock and with minimal supervision’ and generated 10,071 personnel action forms to date. Additional implementation of RPA at UNV includes financial reports and account activity analyses, showing that more complex automation can be done under human supervision.

Technological Innovation, Humanitarian Aid and Human Rights

Leveraging automation to strengthen existing digital channels could positively transform the humanitarian operations and outputs we know, resulting in greater efficiencies and effectiveness of delivery of humanitarian assistance to those affected by disasters but also to those focused on disaster mitigation in the first place.

However, any technology used in the context of crisis management and humanitarian aid efforts should be obliged to a human-centric approach, which allows human intervention and oversight. Transforming humanitarian aid operations should never come at the cost of violating human rights and human security. Furthermore, it should be built in a way which disallows digital inequality. The right to privacy and data protection should be fully respected, and all humanitarian aid operations data should be safeguarded from any cyber-attacks or data leaks or misuse. Next-gen technological innovation, such as intelligent automation, should never be used against those who are in need of humanitarian aid.

The current global recovery calls for green, digital and resilient systems in the private and public sectors. Automation could be the sustainable and ‘green’ path to improving humanitarian aid operations – if applied correctly.

This article was originally published on 22 January 2023.

About the Author

Dalia Alic is an International Research Fellow on Emerging Technology in Europuls – Centre for European Excellence and Centre for AI and Digital Policy Research Group Member, Dalia co-authors research papers with a focus on human security in transnational lawmaking, multilateral treaties and international regulatory frameworks on AI and cybersecurity.

References

1. Thomas, Anisya (2005). From Logistics to Supply Chain Management: The Path Forward in the Humanitarian Sector. USA: Fritz Institute.
2. Tomasini, R., & Wassenhove, L. van. (2009). Humanitarian logistics. Palgrave Macmillan.
3. Yadav, Devendra K & Barve, Akhilesh. (2015). Analysis of critical success factors of humanitarian supply chain: An application of Interpretive Structural Modeling. International Journal of Disaster Risk Reduction. 12. 10.1016/j.ijdrr.2015.01.008.

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Introduction

“Resilience” seems to be a common term used by professionals in many disciplines. Psychologists and medical experts talk about personal resilience, and corporate analysts, coaches and consultants talk about corporate resilience. After all, not only people but also their corporations need to overcome the state of dystopia¹, reaching that of “eutopia”. Dystopia, according to Wikipedia, stemming from the ancient Greek δυσ (dus, “bad”), and τόπος (tópos, “place”), and also called “cacotopia” or “anti-utopia”, refers to a society that is undesirable or frightening. It is often treated as an antonym of “utopia”, a term that was coined by Sir Thomas Moore and figures as the title of his best-known work, published in 1516, which created a blueprint for an ideal society with minimal crime, violence, and poverty. The relationship between utopia and dystopia is in actuality, not one simple opposition, as many utopian elements and components are found in dystopias as well, and vice versa… Dystopias are often characterised by fear or distress, tyrannical governments, environmental disaster, or other characteristics associated with a cataclysmic decline in society. Themes typical of a dystopian society include complete control over the people in the society through the usage of propaganda, heavy censoring of information or denial of free thought, worshipping an unattainable goal, the complete loss of individuality, and heavy enforcement of conformity. Despite certain overlaps, dystopian fiction is distinct from post-apocalyptic fiction, and an undesirable society is not necessarily dystopian. Dystopian societies appear in many fictional works and artistic representations, particularly in stories set in the future. Famous examples include George Orwell’s Nineteen Eighty-Four (1949), Aldous Huxley’s Brave New World (1932), and Ray Bradbury’s Fahrenheit 451 (1953). Dystopian societies appear in many sub-genres of fiction and are often used to draw attention to society, environment, politics, economics, religion, psychology, ethics, science, or technology. Some authors use the term to refer to existing societies, many of which are, or have been, totalitarian states or societies in an advanced state of collapse. Dystopias, through an exaggerated worst-case scenario, often make criticism about a current trend, societal norm, or political system.

A utopia is a place whose existence is impossible (“u” = no, impossible, “topos” = place). Thomas Moore himself, the author of the word, spoke of “eutopia” or “possible good place” (“eu” = good, adequate, and “topos” = place) to designate a necessary and realisable state between utopia and dystopia. Homo sapiens needs to realise the evolutionary state of eutopia that the world undergoes where genuine human values are embedded — this is possible. Activating unconditional kindness in a dystopia of war is not a utopian oxymoron.

In the following paragraphs we share our reflections and suggestions on how to enhance personal and collective values, based on principles rooted in the field of health psychology aims at enhancing resilience. The paper is addressed to all people immersed in one of the many situations of wars and violence occurring today in our dystopian world, and especially to the agents and victims of the current ongoing wars in Israel and Ukraine, as well as tens of other armed conflicts around the world². The horror, cruelty, and emotional hardship of war is one of the most stressful and difficult situations for any human being to face, and the collective consequences for ethical, economic, and psychological health and well-being are just terrible.

In this paper, we build on the concept of eutopia and its underlying construct of kindness. We argue that it can serve as a base to build personal resilience especially in the dystopian context of war. Personal resilience refers to an individual’s ability to adapt and bounce back from difficult or challenging situations. It involves maintaining a positive mindset, managing stress and emotions effectively, and being able to cope with adversity. Personal resilience allows individuals to face and overcome obstacles, setbacks, and failures, and to continue moving forward in pursuit of their goals and well-being. It involves developing skills such as problem-solving, self-confidence, perseverance, and flexibility. Personal resilience is essential for maintaining mental and emotional well-being, as well as for achieving success and fulfillment in various aspects of life.

Resilience Approached From the Angle of Unconditional Kindness

While there are many suggestions and angles proposed by experts to enhance resilience, an emerging angle is that of unconditional kindness to self and others.
Unconditional kindness goes far beyond mere formal courtesy or good manners. We argue that unconditional kindness is the radical antidote to the poison of hostility, hatred, revenge, and violence; and its short-, medium-, and long-term effects are highly beneficial for eutopic systemic transformation. (Exhibit 1)

Unconditional kindness refers to taking care of, and being compassionate towards oneself and others under any circumstances; it is the desire to liberate oneself from suffering and free others from suffering, without any other expectations or conditions attached. It is a selfless and genuine expression of love and goodwill towards onself and others, motivated solely by the desire of being more content. Unconditional kindness does not seek recognition, reward, or reciprocation; it is given simply because it is the right thing to do for our personal and collective well-being.

The tree of unconditional kindness

Kindness should be unconditional, or it is not a genuine form of kindness. The metaphor of the tree of unconditional kindness embeds the respective values that are necessary in order to live, coexist, and die in peace. We wonder if there is anything else more important.

We know that the essential elements of a fruit tree are the root, the trunk, the branches, and its fruits. And for its growth, it also needs soil with sufficient nutrients, rainwater, and sunlight. A tree needs to be resilient, since it can be attacked by numerous pests that impede its growth. (Exhibit 2)

Honouring all the many ancestral traditions that refer to the “Tree of Life” as a tree of knowledge, we can use it in a metaphorical way for an initial approach to the eutopic phenomenon of the possible unconditional human kindness and all its associated values, representing our necessary personal and collective evolution as the species Homo sapiens.

Genuine kindness is pure, unconditional, active acts of love or compassion: It exists and manifests itself from the inside out as a gift or grace of our human nature that flows and empowers its own, and liberates us from our own and others’ suffering.
Obviously, controversy prevails as to whether the essential human nature is silent, peaceful, and kind or, by contrast, it is a wolf for man, noisy, aggressive, and unsympathetic. If Buddha, Machiavelli, Jesus Christ, Rousseau, and Hobbes were to converse on the subject, they would most likely disagree.

However, employing the analogy of the tree, they would probably conclude that, in any case, the human being has seeds of love and hate, and whether or not its best positive essence manifests itself depends on the form of relational values. For the best fruits to be produced, solid, healthy roots and sufficient nutrients, irrigation, and abundant light are required. Let’s elaborate a bit more on this.

The essential root

The essential root of unconditional kindness is grounded in our neurobiology as we evolve as human beings called Homo sapiens. It is from our inner core of serenity and loving goodness and compassion, firm yet subtle and delicate, that we can treat and care for ourselves as genuine human mammals.

As the great Tibetan master Chogyam Trungpa states, “At the core of every human being there is a tender and delicate point”³. His disciple, the Californian psychologist Stephen Gilligan, says that “it is an indestructible core”⁴. Indestructible means that it is unconditional in character, being especially associated with our inner firmness or solidity to treat ourselves and others well and to face suffering with kindness, whatever its origin, from our inner strength and freedom.

Therefore, we argue that all Homo sapiens have within our being the valuable and surprising gift of an inner space of serenity, kind love, generosity, and awareness of union and interdependence with all that exists that we can call our “Unconditional Tender Core”, highlighting the firm and solid character of this radical tenderness or gentleness, under any circumstance. It constitutes the root of kindness and unconditional good treatment with oneself, of others, and of the rest of nature.

The “only” thing to do to access this root or kind core is to intuit its existence and to free ourselves with benevolence from the armour of fears and adaptive defences that we have accumulated throughout life, contemplating and even using constructively the character with which we move in our different biographical spheres.

The “new” technologies available to us to care for this core root are meditative silence, conscious ownership of time, transformative conversation, understanding forgiveness, gratitude, and joy, which are shown in Exhibit 1. Notice that it has much to do with the sun, rain, and the core values or manifestations of the serene and loving root of the tree of unconditional kindness.

The trunk values of unconditional kindness:

From this radical connection with our peaceful, compassionate, and interdependent essence, the great values of empathy, humility, patience, generosity, care for self and others, understanding forgiveness, gratitude, and joy manifest and grow, constituting the trunk from which the three branches and the many fruits of unconditional kindness grow.

The three branches of expression:

The tree of unconditional kindness has three intertwined branches or expressive dimensions: towards oneself, towards others, and towards the rest of nature of which we are a part. In turn, kindness to those around us has many other possible bifurcations, from kindness in the couple to kindness in the health care system or in sports, to name a few.

Fruits of unconditional kindness:

Kindness has six types of essential fruits, all of them related to each other:

1. Biological: longevity and cardiovascular health.
2. Ethical: cooperation, equality, fraternity, brotherhood, fraternity, solidarity.
3. Emotional: non-aggressiveness, satisfaction, emotional well-being, warmth.
4. Relational: quality of bonding, mutual attraction, reciprocity, knowing how to accompany, knowing how to listen, knowing how to ask, knowing how to say no, conflict prevention, recognition, knowing how to have details, courtesy, smiling.
5. Existential-spiritual: knowing how to accept, being able to die in peace.
6. Business: attracting and releasing talent, commitment, work motivation and positive work environment, team development, and customer and supplier loyalty.

Soil and compost:

The base or nutrient substrate on which the loving roots of unconditional kindness grow is constituted by the other two essential meta-values: trust and coherence.
Trust, as we explain later, is a meta-value of our generative emotional intelligence, while coherence is the meta-value of our pragmatic value intelligence. Without trust no conversation or creativity is possible, and without coherence of action we remain in the colorful clouds. Without the essential nutrients or fertiliser of trust or belief in self and others and coherence or union between what is said and done, the tree can in no way thrive to its fullest splendour.

Rainwater:

The rainwater is necessary for the growth of unconditional kindness; it is the transformative conversation with oneself and others. Without it, the tree remains static and lifeless.

Sunlight:

Sunlight is represented by the experience of full presence, which consists of noticing (awareness) and being mindful (consciousness) of all that is happening here and now within us and in the world around us. Only from full presence can we connect with our indestructible tender core and be able to choose and cultivate with wisdom the values that allow us to act with unconditional kindness towards ourselves, towards those around us, and towards everything around us. Full presence is illuminated from silence and inner space and from the subjective ownership of time here and now. And it is associated with active compassion, mutual understanding and gratitude.

The neurobiological base of unconditional kindness and its’ relationship to resilience

The neurobiology of unconditional kindness involves several regions of the brain and neurotransmitters that contribute to the experience and expression of goodness and empathy.

One important brain region involved in kindness is the prefrontal cortex, particularly the ventromedial prefrontal cortex (vmPFC) and the dorsolateral prefrontal cortex (dlPFC). The vmPFC is associated with empathetic responses and social cognition, while the dlPFC is involved in decision-making and self-regulation. These regions help us understand others’ emotions and make conscious choices to engage in kind behaviours.

Another crucial brain region is the striatum, which is part of the reward system. When we engage in acts of kindness or witness kindness, the striatum releases dopamine, a neurotransmitter associated with pleasure and reward. This dopamine release reinforces kind behaviour and motivates us to continue being kind.

The amygdala, an almond-shaped structure in the brain, also plays a role in kindness. The amygdala is involved in processing emotions, particularly fear and aggression. Studies have shown that when individuals engage in acts of kindness, the amygdala’s response to negative stimuli decreases, suggesting that kindness can reduce negative emotions and promote positive feelings and prosocial behaviour.

Oxytocin, often referred to as the “love hormone”, is another key player in kindness. Oxytocin is released during social bonding and promotes feelings of warmth, trust, empathy, and generosity. It enhances social bonding and strengthens relationships, making acts of kindness more likely.

Finally, mirror neurons are important in understanding and imitating the actions and emotions of others. These neurons fire both when we perform an action and when we observe someone else performing the same action. Mirror neurons help us empathise with others and understand their experiences, facilitating kind and compassionate behaviour.

Overall, the neurobiology of unconditional kindness involves a complex interplay between brain regions, neurotransmitters, and social cognition processes. Understanding these mechanisms can help us appreciate the importance of kindness in promoting positive social interactions and well-being.

So, the conscious practice of unconditional kindness enhances resilience. Kindness is not only a virtue that contributes to positive relationships and overall well-being, but it also plays a significant role in enhancing resilience. When we practise kindness, we benefit not only others but also ourselves. Acts of kindness release hormones like oxytocin and serotonin, which promote feelings of happiness, contentment, and overall well-being. These positive emotions strengthen our mental and emotional resilience, making it easier for us to cope with stress and bounce back from setbacks.

Additionally, kindness fosters social connections and support networks. When we show kindness to others, we build strong relationships and create a sense of community. These connections provide a safety net during challenging times, as we can turn to others for support, encouragement, and assistance. Having a strong support system is crucial for resilience, as it helps us feel less alone and provides us with the resources and emotional support needed to navigate difficult situations.

Furthermore, acts of kindness can also inspire others to be kind, creating a ripple effect of positivity and resilience within a community. Witnessing or experiencing kindness can boost our own resilience by reminding us of the inherent goodness in people and the potential for positive change. It can also motivate us to pay it forward and engage in acts of kindness ourselves, further strengthening our resilience and the resilience of those around us.

The three circles model

The three circles model is a theory proposed by Paul Gilbert⁵, Professor of Clinical Psychology at the University of Derby and founder of The Compassionate Mind Foundation. This model is central to Compassion Focused Therapy (CFT) and aims to understand the complexity of the brain’s systems and mechanisms for survival and growth. (Exhibit 3)

In summary, kindness enhances resilience by promoting positive emotions, fostering social connections, and inspiring others to be kind. By practising kindness, we not only improve our own well-being but also contribute to a more resilient and compassionate society.

Values, values intelligence, and enhancement of kindness-based resilience.

There are a host of values that can enhance kindness-based resilience in individuals and navigate through life’s ups and downs with adaptive intelligence.

The word “intelligence” comes from the Latin “legere”, containing the meanings of reading and choosing. Salvador Garcia (2018) has proposed the concept of “Values Intelligence”⁶. The concept can easily be added as another form of intelligence to the list of multiple intelligence proposed in the wonderful work of Howard Gardner.⁷

Coming from the state of full consciousness or mindfulness, is described as the wisdom to read the reality as it is and choose the values response or guides for action that seem to be most convenient for our full personal and collective development. Dolan (2020) also added that depending on the situations and the objectives of the person, the values need constant reflection of alignment and realignment⁸. Considering the so-called “Triaxial Model of Values” created by the two authors, these are the essential more intelligent values related to unconditional kindness:

Ethical Values 

• Empathic love – This meta-value of unconditional kindness involves being able to understand and share the feelings of others. It allows individuals to connect with and support others with caring love, which can help to build social support networks and enhance resilience.
  
• Gratitude – Gratitude wish is intimately related to the concept of unconditional kindness treated in this paper. Cultivating a sense of gratitude can help individuals to focus on the positive aspects of their lives, even in difficult times. It can help to shift their perspective and foster a sense of resilience.
  
• Solidarity – Coming from the Latin solidus, solidarity or the ability to help in overcoming vulnerability, strengthens the quality of human relationships arises from empathy and unconditional kindness and generosity, and increases the capacity to face the vicissitudes of life.
  
• Generosity – The word “generosity” comes from the Latin generosus, which means abundant and well engendered. Generosity is a quality of unconditional kindness necessary for the evolution “from ego to eco”, from self-interest to common good, as proposed by Otto Shramer.⁹
  
• Forgiveness – Forgiveness is a powerful resilience medicine to heal emotional wounds. It starts from the idea of benevolence or wanting the good of the other, without excusing or forgetting the bad action suffered, and without ceasing to desire compensation for the damage. As Daniel Lumera, the Italian promoter of the International Kindness Movement¹⁰, says: “What do we want–to assert our reasons or to be free?”

Pragmatical Values 

• Coherence and determination – Having a strong sense of purpose and self kindness helps individuals to persevere through challenges and setbacks. It is a meta-value of unconditional kindness to oneself, allowing one to stay focused on one’s goals and continue working towards them, even in the face of adversity, being conherent between what one thinks, feels, says and does.
• Adaptability – Being adaptable means being able to adjust and respond effectively to changing circumstances. It involves being openly kind to new ideas and approaches and being willing to learn and grow from experiences.
• Perseverance – Perseverance involves the ability to keep going and not give up, even when faced with obstacles or setbacks. It requires individuals to have a strong work and life ethic and a willingness to put in the effort required to achieve their goals in a kind or caring way with one self and others.

Emotional – Generative Values 

Emotional-generative values can be also called “poietic” for their quality of facilitating the self-emergence of new and beautiful possibilities for action.

• Trust and self-belief – Means having a strong sense of self-belief and self-confidence is a meta-value crucial for resilience. It allows individuals to trust in their own abilities and to have faith in their capacity to overcome challenges.
• Optimism – Being optimistic helps individuals to maintain a positive outlook, even in difficult circumstances. It allows them to see challenges as opportunities for growth and to believe in their ability to overcome obstacles.
• Patience – Coming from the possibility of being “in a peace mood”, patience is an emotional-generative value related to determination, adaptability and perserversance to achieve our medium- and long-term objectives
• Creativity – Creativity is an essential emotional-generative value to find new solutions to problems and to express with small but significant details the meta-value of unconditional kindness.
• Joy and celebration – The playful and conscious appreciation of everything we have accomplished and what we have learned. It is based upon gratitude and mindfulness, recognition of what has happened, seeing what we have done, and increasing our resilience about future events.

In other words, in this paper we propose to use the concept of “Unconditional kindness” as a meta-value that complements our previously proposed three axes deducted from the universe of values: the ethical, the pragmatic, and the emotional-generative (Triaxial Model of Values¹¹).

In addition to an overall meta-value of unconditional kindness, we also propose the practice of a respective sub-meta-value in each of the axes. For example, the sub-meta-value of ethical intelligence will be empathic love; the sub meta-value of the emotional-generative or “poietic” intelligence axis will be trust and self-belief, and the sub-meta-value of pragmatic intelligence will be coherence and determination. An illustration of these concepts is summarised in Exhibit 4.

Now, let’s examine these sub-meta-values of unconditional kindness in relationships to resilience. Let’s start with LOVE. Although some experts claim that love is more a type of need than a value, regardless of its exact definition and classification, it seems to play a vital role in the development of resilience. Exhibit 5 shows some ways in which the ethical values intelligence of EMPATHIC LOVE can contribute to resilience:

All in all, love plays a central role in enhancing resilience by providing emotional support, a sense of belonging, motivation, positive relationships, and self-compassion. It acts as a protective factor that enables individuals to cope with and overcome adversity more effectively.

Trust is another key concept in the development of resilience. Although Dolan et al. claim that TRUST by itself is the “Value of Values”, or the “mother of all values”, it can also be considered a sub-meta-value of the emotional-generative axis of the triaxial model¹².

Trust plays a crucial role in enhancing resilience in various aspects of life and it is especially important at times of dystrophy.

Overall, trust plays a fundamental role in enhancing resilience by promoting social support, collaboration, risk-taking, effective communication, and psychological well-being. Building and maintaining trust in relationships, communities, and organisations is crucial for fostering resilience in the face of adversity.

The last sub-meta-value of pragmatic intelligence referes to COHERENCE AND DETERMINATION. It refers to the state of being consistent, logical, and connected in one’s thoughts, actions, and behaviours. It implies that there is a clear and logical flow in the way someone communicates, makes decisions, and executes tasks. When someone demonstrates coherence in action, they can effectively align their intentions, words, and actions, creating a sense of harmony and integrity. This can lead to improved performance, better relationships, and a stronger sense of self.

Coherence in action involves aligning one’s beliefs, values, and behaviours to create a unified and purposeful approach to life. When individuals have coherence in action, they can make decisions and take actions that are in line with their goals and values, leading to a greater sense of fulfillment and satisfaction.

Coherence in action and resilience are closely related, as they both contribute to overall well-being and success in life. When individuals have coherence in action, they are more likely to have a strong sense of self and purpose, which can enhance their resilience. Similarly, resilience can help individuals maintain coherence in action by allowing them to overcome obstacles and stay focused on their goals.

Together, coherence in action and resilience enable individuals to navigate life’s challenges with greater ease and effectiveness. They provide a solid foundation for personal growth, emotional well-being, and success in various areas of life, including relationships, work, and personal development.

Practical principles for practising self-kindness during a war

Why should we begin by taking care of ourselves?

Just as in an emergency during an air disaster, where you must first put on your own oxygen mask and then be able to help the most vulnerable children or other people, the response of unconditional care or kindness in the case of a war disaster must start with yourself.

Being kind to oneself is an essential aspect of personal well-being and happiness. By treating ourselves with kindness, we cultivate self-compassion, self-acceptance, and self-love. This involves acknowledging our strengths and weaknesses, embracing our imperfections, and practising self-care.

When we prioritise our own well-being, we are better equipped to extend kindness to others. By taking care of ourselves physically, emotionally, and mentally, we have more energy and resources to share with those around us. This can be in the form of offering support, lending a listening ear, or showing empathy and understanding.

Furthermore, being kind to ourselves sets an example for others to follow. When people witness our self-compassion and self-care practices, they are more likely to adopt similar behaviours. By modelling kindness towards ourselves, we inspire and encourage others to do the same.

Ultimately, by being kind to ourselves first, we create a positive ripple effect. When we prioritise self-kindness, we not only enhance our own well-being but also contribute to creating a kinder and more compassionate world.

1. Keep the Inner Calm 

1. Practise mindfulness: Try to stay grounded and situate yourself in the reality of the present, contemplating the horror face to face. Try to become aware of the breath, and go within oneself “here and now”, connecting with the inner centre of peace, self-compassion, and kindness.
   
   In situations of relative calm, try to live small moments of mindfulness or full consciousness about very simple but meaningful things, such as when sipping water, when eating something, when giving or receiving a caress from a loved one, when thanking someone for something, when receiving someone’s support or thanks, when remembering a positive episode in life…
   
   Obviously, this soothing response of calm and soothing in the face of disaster and suffering of self and others is more likely to occur in people trained to meditate, but it is not impossible in any circumstance.
   
   If we panic or succumb to hatred and thirst for revenge, we will not be able to think adequately to face the situation with the best possible guarantees of physical and emotional survival for ourselves and others.
   
   No doubt, maintaining calm in times of war can be extremely challenging, and some even call it a utopia. However, it is essential for survival and our own well-being. Here are further eutopic strategies that can help:
2. Stay informed: Knowledge about the situation can help reduce fear and uncertainty. Stay updated with reliable news sources to understand the status, developments, and potential risks. However, be cautious about consuming excessive or sensationalised information, as it can heighten anxiety.
3. Create a safety plan: Develop a plan for yourself and your loved ones to ensure their safety during wartime. Identify safe areas, emergency contacts, and evacuation routes. Having a plan in place can provide a sense of control and reassurance.
4. Practise self-care: Take care of your physical and mental well-being. Engage in activities that help you relax and reduce stress, such as exercising, meditating, or pursuing hobbies. Prioritise self-care to maintain emotional stability and resilience.
   Seek support: Connect with others who are going through similar experiences. Share your concerns, fears, and emotions with trusted friends, family members, or support groups. Talking about your feelings can help alleviate stress and provide a sense of solidarity.
5. Maintain routines: Establishing daily routines can provide a sense of normalcy and stability amidst chaos. Stick to regular schedules for meals, sleep, work, or other activities as much as possible. Routines can help create a sense of control and reduce anxiety
6. Limit exposure to violence: Minimise exposure to violent images, videos, or graphic content. Constant exposure to violence can increase stress levels and desensitise individuals. Instead, focus on positive aspects of life, engage in uplifting activities, or seek out inspiring stories.
7. Seek professional help if needed: If you find it difficult to cope with the stress of war, do not hesitate to seek professional help. Mental health professionals can provide guidance, support, and coping strategies tailored to your specific needs.

Remember, staying calm in times of war is a gradual process, and it’s normal to experience ups and downs. Be patient with yourself and others and focus on the strategies that work best for you.

2. Recognise and Express What You Feel

Autodidactic exercise: Try to name the emotions you are feeling and try to share them with others, whether it is fear, hatred, anger, helplessness, indignation, humiliation, vulnerability, sadness, guilt, revenge, affection, and concern for those closest to you, or a combination of several of these.

In other words, naming emotions and expressing them can indeed be a powerful strategy for resilience during times of war. Here are some clear emotions that individuals may experience during such challenging times and converting them into resilience:

• Fear: Acknowledging and naming fear can help individuals understand their own vulnerabilities and take necessary precautions to ensure their safety.
  Anger: Expressing anger in a constructive manner can help individuals channel their frustrations towards positive actions, such as advocating for peace or seeking justice for those affected by war.
• Sadness: Recognising and expressing sadness can allow individuals to grieve for the losses experienced during war, fostering healing and emotional resilience.
• Empathy: Cultivating empathy towards others affected by war can help individuals build connections and support networks, fostering a sense of community and resilience.
• Hope: Holding onto hope and expressing it can serve as a driving force during times of war, providing individuals with the strength to endure and work towards a better future.

In sum, by naming and expressing these emotions, individuals can better understand their own emotional landscape, seek support from others, and develop strategies to cope with the challenges of war. It is important to note that emotions are complex and multifaceted, and individuals may experience a wide range of emotions during times of war.

3. Maintain Life Hope

To realise that one is still alive, to sustain the painful present, to activate all the internal resources, emotions, values, and inner strength that one has to maintain the hope that one can get out of the horror, proposing different objectives and perspectives in the short and medium-long term and thinking about learning and personal growth after the hecatomb.

One needs to re-emphasise the role that hope plays in enhancing resilience during times of war. It provides individuals with a sense of purpose, motivation, and optimism, enabling them to endure and overcome the challenges and adversities associated with war.

Here are some ways in which hope enhances resilience:

• Psychological well-being: Hope helps individuals maintain a positive mindset and outlook, even in the face of extreme hardship. It allows them to believe in a better future and envision possibilities beyond the current situation. This psychological well-being helps individuals cope with stress, trauma, and anxiety during war.
• Motivation and determination: Hope fuels motivation and determination to persevere through difficult circumstances. It gives people the strength to keep going, despite the immense challenges and sacrifices required during war. Hope instils a sense of purpose and empowers individuals to fight for a better future.
• Resisting despair: War often brings about a sense of despair and hopelessness. However, hope acts as a counterforce to despair, enabling individuals to resist giving in to negative emotions. It provides a sense of resilience and the belief that things can and will improve, even in the darkest of times.
• Building community and support: Hope can bring people together, fostering a sense of unity and solidarity. During war, individuals with hope often seek out and connect with others who share their optimism and determination. This sense of community and support is crucial for resilience, as it provides a network of individuals who can offer emotional support, encouragement, and practical assistance.
• Adapting and finding solutions: Hope encourages individuals to think creatively and find innovative solutions to the challenges posed by war. It promotes resilience by enabling individuals to adapt to changing circumstances, identify opportunities for improvement, and work towards positive change.

Overall, hope acts as a powerful force during times of war, enhancing resilience by providing individuals with the mental and emotional strength to endure, overcome, and work towards a better future.

4. Be at the Service of Others

To put ourselves at the service of those closest to us in order to take care of their immediate physical and emotional survival:

• Doing whatever we can in the best interests of physical survival in the most supportive, generous, collaborative and creative way possible.
• Listening to others attentively as much
  as possible.

Being at the service of others can help create resilience during times of crisis such as war because it fosters a sense of purpose, builds social connections, and promotes a sense of unity and collective responsibility. Here are a few reasons why:

• Purpose and meaning: Serving others during a crisis provide individuals with a sense of purpose and meaning in their lives. It gives them a reason to keep going and persevere through difficult times. By focusing on helping others, individuals can find solace in knowing that their actions are making a positive difference in the lives of others, even amidst the chaos and destruction of war.
• Social connections: Serving others during a crisis often involves working together in teams or communities. This creates opportunities for individuals to build strong social connections and support networks. These connections can provide emotional support, encouragement, and a sense of belonging, all of which are crucial for resilience during times of crisis. By working together, individuals can share their burdens and find strength in the collective effort.
• Unity and collective responsibility: Serving others fosters a sense of unity and collective responsibility. During times of war, communities often come together to support and protect each other. By actively participating in service, individuals contribute to the overall well-being of their community, which strengthens the bonds between community members. This sense of unity and collective responsibility can help individuals withstand the challenges of war and create a resilient community whose members supports and uplifts each other.
• Psychological benefits: Serving others can have positive psychological effects on individuals. It can provide a sense of satisfaction, fulfillment, and a boost in self-esteem. These positive emotions and feelings can act as protective factors during times of crisis, helping individuals cope with stress, trauma, and adversity more effectively.

Overall, being at the service of others during times of crisis like war can help create resilience by providing individuals with a sense of purpose, building social connections, fostering unity, and promoting positive psychological well-being. These factors contribute to the ability to bounce back, adapt, and persevere through challenging circumstances.

5. Transform and Channel.

Although it is practically impossible to justify or excuse situation of violence nor is it easy to forget the damage caused, the most radical, extraordinary, powerful, practical and emotionally healthy response of kindness might be a proper medium to do so, and engaging in it for the long term leads to transforming and channeling the emotional energy of fear and rage into compassionate energy of forgiveness on behalf of the aggressor. The reparation of the damage caused, and construction of new realities of future may coexists.

From a state of serenity and the practice of mindfulness and unconditional kindness, it is possible to think re imagine and rewrite realty. Afterall, reality is truly in the eye of the beholder. Here are a few examples:

• “No truth is totally true; it is only partly true at best. Do not categorise, do not judge, do not align yourself with any ideology. What I think and believe today is different from what I thought and believed some time ago and what I will think and believe years from now…”
• Truths can be considered relative and subjective because they are shaped by individual perspectives, beliefs, and experiences. Different people may perceive and interpret the same information or situation differently, leading to varying conclusions about what is true. Cognitive biases and personal biases can also influence how individuals perceive and accept certain truths. These biases can be based on cultural, societal, or personal factors, which can lead to different understandings of what is true. Furthermore, truth can be influenced by the context in which it is presented. The same information can be interpreted differently depending on the cultural, social, or historical background of the person receiving it. This means that truth can be relative to a particular context or situation.
• Additionally, truth can also be subjective because it often involves personal beliefs and values. What one person considers true may be different from what another person believes to be true, based on their own values and beliefs. This subjectivity makes truth a matter of personal perspective and perception.

In summary, truths are relative and in the eye of the beholder because they are influenced by individual perspectives, biases, experiences, and cultural contexts.

“If I had been born in a different place, had lived through different social circumstances, different friends, different family, different environment, different education… If I had suffered certain abuses, treatment, abandonment, contempt, discrimination… What would I be like today? Perhaps like the aggressor who is now killing us…”.

Thus, forgiveness is possible.

In fact, we are all united with everyone from the genetic matter that constitutes us as the human species of Homo sapiens. We all come from the first living beings that existed. We are all biologically interdependent siblings.

Hopefully we Homo sapiens will one day evolve into “Homo amabilis”, being aware that the brain response of unconditional kindness is much more convenient for our survival as a species than the response of endless revenge or violence.

An apparent paradox: War crisis and despair leads to growth

While it sounds like an unbelievable paradox, research shows that the aftermath of crises, such as wars and other disasters can lead to growth and renovation because they force individuals or societies to reassess their current situation and make necessary changes. When faced with a crisis or feeling despair, people are often pushed out of their comfort zones and are forced to confront their weaknesses, limitations, or failures. This can lead to a period of self-reflection and introspection, where individuals or societies evaluate their values, priorities, and goals. During this process, people may discover new strengths, develop resilience, and gain a deeper understanding of themselves and the world around them. They may also become more open to change and more willing to take risks to overcome the crisis or despair they are facing.

Additionally, crisis and despair can bring people together and foster a sense of community. In times of adversity, individuals often find support and solidarity with others who are going through similar experiences. This shared experience can create a sense of unity and motivate people to work together towards finding solutions and creating positive change.

Ultimately, crisis and despair can serve as catalysts for growth and renovation because they challenge individuals and societies to adapt, innovate, and evolve. They can lead to new perspectives, new ideas, and new approaches that can bring about positive transformation and renewal.

Conclusion

Resilience during times of war and dystopia is indeed a significant challenge. The stress of armed conflict creates a multitude of physical, emotional, psychological, political and economic hardships that can severely test the resilience of individuals and communities.

War often results in the loss of loved ones, destruction of homes, and displacement of communities. These traumatic experiences can have long-lasting effects on individuals, making it difficult to bounce back and rebuild their lives. During times of war and conflict, people live in constant fear and uncertainty. The threat of violence, displacement, and loss can create a sense of helplessness and anxiety, making it challenging to maintain resilience.

Despite these challenges, resilience can still emerge during times of war and conflict. Communities often come together to support one another, find ways to adapt, and rebuild their lives. Resilience during these times is about finding strength in the face of adversity, adapting to new circumstances, and seeking support from others. It requires a combination of individual and collective efforts to overcome the challenges and rebuild lives in the aftermath of war and conflict.

While there are various approaches to enhancing resilience, this paper suggests a distinctive perspective centred around unconditional kindness. The emergence of unconditional kindness involves showing empathy, compassion, and support towards oneself and others, without any conditions or expectations. This approach to resilience recognises the importance of fostering positive emotions, building strong relationships, and cultivating a sense of love and belonging.

Firstly, practicing unconditional kindness towards oneself can significantly contribute to resilience. This involves being self-compassionate and understanding when facing challenges or setbacks. Instead of being self-critical or judgmental, individuals can offer themselves kindness and understanding, recognising that everyone makes mistakes and experiences difficulties. This self-compassion helps in developing a resilient mindset by promoting self-acceptance, self-care, self-confidence and, ultimately, self-esteem.

Secondly, extending unconditional kindness to others can also enhance resilience. By offering empathy and support to those around us, we create a sense of connection and belonging. This social support network becomes crucial during tough times, as it provides a safe space to share experiences, seek advice, and receive emotional support. Acts of kindness towards others not only benefit them but also foster positive emotions within us, leading to increased resilience.

Furthermore, promoting a culture of unconditional kindness within communities and organisations can have a profound impact on resilience. When kindness becomes a shared value, individuals feel supported, valued, and motivated to overcome challenges. This can be achieved through initiatives such as kindness campaigns, peer support programmes, or fostering a positive, participative and inclusive work environment.

As Homo sapiens, we need the resilient re-evolution of unconditional kindness!

About the Authors

Dr. Salvador García Sánchez is a medical doctor and social psychologist. He is a professor at the University of Barcelona. He is a co-founder of the Butterfly Movement, a eutopic alliance of values and conversations between old and young generations aiming at pollinating unconditional kindness to self and others. Creator of the “Values Intelligence” model and the “Cards on the Table” conversational tool.

Dr. Simon L. Dolan has completed his doctorate at the University of Minnesota in HRM and Work Psychology. He is presently a full professor and senior researcher at Advantere School of Management. He is a prolific writer (over 85 books and more than 150 articles published in scientific journals)) and founder of the think tank “Global Future of Work Foundation,” in which he serves as the president. He is the creator of the coaching and leading by values philosophy, methodology, and tools. More: www.simondolan.com

References

1. https://en.wikipedia.org/wiki/Dystopia
   See: List of ongoing armed conflicts, https://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts
2. https://en.wikipedia.org/wiki/Ch%C3%B6gyam_Trungpa
3. https://www.stephengilligan.com/
4. Gilbert, P. “An Evolutionary Approach to Emotion in Mental Health With a Focus on Affiliative Emotions”. Emotion Review 7(3). July 2015
5. Salvador Garcia (2018) Inteligencia de Valores. Alicante: ECU. English version forthcoming: “Values Intelligence: a good step inside and three steps forward”.
6. Howard Gardner (1993) Multiple Intelligences. Basic Books.
7. Simon L. Dolan (2020) The secret of coaching and Leading by Values: How to ensure alignment and realignment (Routledge).
8. https://www.clubofrome.org/publication/earth4all-scharmer/
9. https://www.theworldkindnessmovement.org
10. See: García, S. and Dolan, S (1997) La Dirección por Valores: la gestión del cambio más allá de la dirección por objetivos (McGraw Hill); Dolan S.L., Garcia S., Richely B (2016) Managing by Values:
11. A corporate Guide to Living, Being alive and making a living in the 21st Century (Palgrave MacMillan).
12. Dolan, S.L. Brykman, K., (2024) The Art and Science of Building Trust (forthcoming in 2024).

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All the way back in 1971, HACCP was first introduced to the food industry at the National Conference on Food Protection. Ever since then, it has been an integral part of the food industry, helping countless businesses to provide customers with safe food.

So, what exactly is HACCP? It’s simple, really. HACCP is a smart way of managing every aspect of your food safety through different HACCP principles. The HACCP principles are:

• Conduct hazard analysis
• CCP identification
• Establish critical limits
• Monitor procedures
• Implement correction actions
• Establish verification procedures
• Follow record-keeping and documentation procedures

Let’s take a closer look at how these principles work.

Conduct Hazard Analysis

Hazard analysis allows you (the food production company) to uncover potential hazards throughout your organization. When hazards are found, you can then implement preventive and corrective actions so that nobody, from your employees to customers, is harmed.

An example of this would be if a HACCP team conducted a hazard analysis of frozen cooked beef and discovered the presence of enteric pathogens, which can cause disease. Naturally, this would mean that the production of the cooked beef would need to be halted to ensure the future safety of customers.

Other types of hazards can also include chemical hazards, which usually appear during food safety processes. You can learn more about this (and how to handle chemical hazards) at safefood360.com.

CCP Identification

Critical Control Points (CCPs) are very important. They are the “control points” where hazards are prevented, eliminated, or reduced. For instance, thermal processing would be an example of a CCP. Essentially, it’s any type of corrective action put into place.

Establish Critical Limits

Critical limits are conditions in which hazards need to be controlled or eliminated. These conditions are very specific and key to the successful elimination of hazards. Examples include temperature, time, and water activity.

Monitor Procedures

Monitoring procedures are designed so that you can understand whether processes and different CCPs are operating as they should be. During the monitoring, you might discover that they aren’t, which is when changes can be made.

Implement Corrective Actions

If a critical limit isn’t being met, then what needs to be done? These are the corrective actions. You might find that your corrective actions vary, from rejecting foods entirely to chilling products that have gone above a certain temperature.

Establish Verification Procedures

Verification procedures in a HACCP plan look at documentation compliance and the effectiveness of procedures to ensure that everything is verified. Often, period verifications are needed due to changes that are implemented.

Follow Record-keeping and Documentation Procedures

The final step is to follow record-keeping and documentation procedures. This is when you collect all the information and data from your HACCP plan and keep it safely secured. This will include hazard analysis sheets, details about HACCP team members, the cost of CCPs, and more.

As a food production company, you need to have an excellent HACCP plan in place moving into the future so that you can ensure the maximum safety of your customers and clients.

The post Hazard Analysis and Critical Control Point (HACCP) Explained appeared first on The European Business Review.

Many corporations are facing the impossible. They have PII and IP, but once exposed, they face the risk of either data privacy breaches or revealing company secrets that would have given them market advantage. The major question becomes: how can we remain compliant without losing our edge?

Who does not know the problem: Personally Identifiable Information, PII for short. Suddenly, it sounds great to use the term without really knowing what it is and what to do with it. My trip will lead to document review, but I should first describe the initial situation.

It should be noted that the dilemma begins with defining the term. The National Institute of Security Technology (NIST) has adopted the following definition, which is unofficial but most commonly used: “Any information about an individual held by a government agency, including (1) all information used to distinguish or trace an individual’s identity, such as name, social security number, date and place of birth, mother’s maiden name or biometric records, and (2) any other information that can be linked to an individual, such as medical, educational, financial and work-related information.” In short, it is any data that can be used to identify an individual. But NIST goes a step further and shows nuances between two types of PII, (a) direct or (b) indirect connection to the person. The difference is easy to explain: with a direct connection the person is immediately identifiable while with an indirect connection, it depends on the combination of at least two components.

But it gets a little more complicated when you notice that there is also the General Data Protection Regulation (GDPR), which speaks of “personal data” or the California Consumer Privacy Act (CCPA), which in turn puts “personal information” in the foreground. Give me one more minute to get to the point: all terms have one thing in common, no matter what jurisdiction or country. If you have to remember one thing only, let it be the following: it’s always about data and about the ability of each person to determine what, who, when, and how is collected and shared about them.

But this regulatory complexity gives people like me who work in legal tech, specifically forensic technology, more opportunity to act proactively and offer technical solutions. What is certain is that technology can only be used with a solid strategy so that it does not become an innovation blocker. Another point worth mentioning is the heightened consumer awareness and demand for transparency. Consumers want to know where their data is and have the answer even with a snap of their fingers. For companies, it means gaining the trust of their consumers and reassuring them that their data is secure, that it is not being shared, and that data management is adapted and, above all, mastered.

And now Forensic Tech Partners come into play. Because our team can take a close look at the data, organise the data landscape and understand what technology is wed with PII, most of the time we are called in when there has already been a data leak. Too late? One might think, but as I read so beautifully on the Relativity website (relativity.com): one should remain calm at every stage. Businesses can help by proactively participating in their data and the governance of it. Only if a company knows where the data is and creates a comprehensive data map, which of course has to be adjusted in the event of changes. Companies should also think about possible anonymisation of the data and how long they will keep it.

But what happens if there are no data maps and PII data is still lost? What happens after a data breach affects PII as well as IP and third-party data? As there are specific timeframes for potential customer inquiries, it is very important to customers that we organise a quick document review that complies with legal conditions and data protection challenges. Most of the time there are no data maps, so what matters most to customers is that the legal tech provider masters the entire eDiscovery spectrum, starting with data acquisition, to processing, production, and presentation. Needless to say, each station has to comply with GDPR requirements. So how do we proceed after reassuring the customer? I should mention that this is a very important point that many overlook. At the end of the day, the customer should feel comfortable, so when engineering and using the latest technology, one should not forget Emotional Intelligence.

Without distinguishing between PII and IP, we first apply custom technology to pre-process and analyse the multi-digit byte data. After that, a team is put together, which adapts the work process (workflows) to the given situation, can set up search queries, enables machine learning, and can also establish customised search term reports. When acquiring the data, great importance is attached to the legal framework in relation to PII and it is also ensured that this spreads to all employees. It should also be mentioned that the data is processed and analysed in ISO27001-certified forensic data centres.

Okay — now you understand the why, how, and what to do with PII to make sure nobody knows when and where you were born and where you live. But what happens to intellectual property, i.e. IP? In the September issue of Harvard Business Manager (HBM 09/ 2022; pp. 18-19), Kiran Sharad Awate writes about this problem. When intellectual property wants to enforce rights and unintentionally reveals secrets. It “only” refers to pharmaceutical companies, but this could happen in almost any industry with creativity. His research has shown that after almost every court hearing, counterparties have a new speed in launching new products similar to those disclosed. His research covers 3,000 patent lawsuits filed by pharmaceutical companies in the US, so it’s not necessarily a global problem, but it should be.

The problem arises after the court hearing, with data on studies ranging from animal to clinical studies being disclosed to the opposing parties. From a technical point of view, my first question at this point would be: How were the documents viewed by the company? Document review, unfortunately, is still seen as the stepchild of the Electronic Discovery Reference Model. It’s just a quick look at the documents. However, this perspective does not take into account that consultation with the review managers, who usually have a legal background, can be very useful. Through close cooperation with the three stakeholders (customer, Doc Review, and the IT staff who process the data), “subjective coding masks” that are precisely tailored to the customer, i.e. transparency plates adapted to customer needs, can be set up on the transparency platform. It is described that clients mostly do not think about the risk and the long-term consequences of the disclosure as they are often only focused on the current litigation. But this is exactly where you should know that technology can help! And here it has to be said that it is only the installation of a selection box for doc reviewers: in addition to the confidentiality level “Confidential”, which only relates to secret data, you would have to install another level of “Highly Confidential”. Prior agreement with the other party must determine that documents containing intellectual property are assigned to this category. Only the opposing party’s lawyer may view these documents in order to confirm the correctness of the assignment. In his research, Kiran Sharad Awate refers to the well-known Amgen vs. GenI case, in which Amgen disclosed all the flawed research in court, which then saved GenI some work and time in their own research. The companies and lawyers involved are certainly aware that their witnesses are well prepared, but here, too, the focus is more on each step of research being explained explicitly without thinking about the consequences. Because the consequences are the acceptance of the research results.

What is the result of the initial question “We have PII and IP… and what now?” Simple: you first have to choose the right legal tech provider. You should also be aware of the risk. In the future, documents related to research should be identified so that they can be seen on data maps. A simple inscription will suffice. This is because these documents can be discarded either at the time of data acquisition, data processing, or review as described above. In this way, you raise the awareness of your employees, you have an accurate data folder, and you ensure that you have no competitors for your own products.

About the Author

Dr. Nina Mohadjer, LLM has worked in various jurisdictions where her cross-border experience as well as her multilingual capabilities have helped her with managing reviews. She is a member of the Global Advisory Board of the 2030 UN Agenda as an Honorary Advisor and Thematic Expert for Sustainable Development Goal 5 (Gender Equality) and the co-founder of Women in eDiscovery Germany.

References

• Awate, K. S. (2022). Ideenklau im Gerichtssaal. Harvard Business Manager, 9, 18–19.
  www.relativity.com

The post Diagnosis: We have PII and IP… now what? appeared first on The European Business Review.

When it comes to approaching risks, we find that compliance is a necessary condition, but, not a sufficient one. Risk has progressively become a significant part of governing board’s agenda. But what do we mean by risk and what types of risks do corporate boards face? Approaches to risk governance have been particularly influenced by regulation focused on financial risks, as a consequence of past governance crises. There are, however, many other types of risks, potentially more damaging for organisations. The role of the boards of directors has undergone a long evolution in its recent history, and today, without replacing executive management, are expected to be more interventionist, especially in the context of risk governance.

Organisations are living systems that proceed in their action across multiple dimensions on a day-to-day basis. Beyond compliance to codes or good practice and standards, boards of directors’ mission is centred on making the chosen future a reality. This implies going beyond mere compliance, not least because achieving the future is a matter of initiative, not optimisation or compromise. Therefore, the due governing bodies shall use the best of their skills and knowledge to achieve their organisations’ objectives while being constrained by the need for proper governance of the multiple risks, some more strategic, which have the power to collapse organisations.

The etymological origin of the word “risk” suggests semantics associated with “running into danger”. On the other hand, the word “governance”, of older origin, was originally related to the art of steering or setting the course of a ship. From the Latin gubernare, to set a course or guide, or from the Greek kybernan, to steer or command a ship. Therefore, risk governance can be defined as the art and science of steering an organisation towards the intended direction while keeping it away from potential dangers, however diverse they may be. There are risks, perhaps more dangerous than the strictly financial ones, and which require special attention from those responsible for corporate governance in order to avoid blind spots. It is also clear that in recent decades, Force Majeure and Acts of God events are occurring more frequently and with increasing impact. However, when compared to the financial costs of catastrophes caused by human behaviour, they often fall short.

There have been considerable efforts to better understand and govern risk. From the development of the ISO 31000 standard, to spending hundreds of millions on Enterprise Risk Management (ERM) systems, in some cases with results that fell short of initial expectations. ERM systems tend to cover every single identifiable risk in organisations, generating an overwhelming amount of data that distracts those responsible for risk governance. Moreover, the use of ERMs has brought with it a “false” sense of safety due to their mere existence. Most of these systems treat risks as independent, when this is not necessarily true, producing amplified and catastrophic effects when risks materialise ⁴. This is associated with the complexity that is so much talked about but so little understood. This complexity is rooted in the non-linear dynamics and behaviour of systems – such as organisations. In this sense, there are decisions within an organisation that affect some parameters that, in turn, are interconnected with other parameters. Such interconnections and non-linear behaviour often result in amplified side effects that no one anticipated. For example, decisions such as underestimating the potential disruptive effects of a new technology being introduced by an obvious (sometimes non-obvious) competitor could produce such impacts. It is worth pondering about the Kodak board´s decision making a few years ago when they decided that the digital camera was not going to have a significant impact on the film market. The dynamics that occurred across the photographic industry not only changed the technology but fostered the massification of photography and filming to unprecedented levels.

It is within this paradigm of balancing risk and reward that risk governance develops and is demanding an increasing involvement and accountability of directors worldwide. This whole new context of attention to risk may make boards of directors “too” risk averse, which is a risk in itself, as such an attitude could slow down the level of initiatives in a company; initiatives that are the engine of innovation and the guarantee of the future sustainability of organisations.

The current risk environment and the increasing responsibility of directors

Governance implies legitimacy and overall supervision – typical of ownership. Management, on the other hand, involves a great deal of technical knowledge of how things are done and supervision of execution details. To manage is to execute something decided by someone else who “directs”, within aims and ways. Thus, the ones who govern define and choose organisational objectives and the people responsible for their achievement – but then limit themselves to supervision and control. Therefore, one could say that corporate “governing” is exercised ‘‘in practice’’ by the top management together with the board of directors.

Senior management is made up of a small number of executives, in some cases only one, who hold the highest executive power within the organisation. The board of directors as a governing body entrusted by the shareholders, is one of the control mechanisms within corporate governance, constituting one of the main figures for the proper functioning of the company and occupying a key position for the fulfilment of the interests of different stakeholders. Therefore, among its main tasks, one finds the supervision of the management team, the approval and monitoring of the chosen strategy, as well as the governance of risks that may jeopardise business continuity.

The current corporate risk context with the increased threats of disruptive technologies, such as artificial intelligence, conflicts, inflation, and geopolitical issues that threaten to affect major economies, places increasing demands on board directors, which may lead to a growing tendency for many to decline such roles, making it more difficult to recruit them. Moreover, partial approaches, whether by way of law, management or engineering, among other areas of knowledge, are insufficient on their own because they are incomplete, which is a risk in itself. Hence, the first useful step is always to classify and analyse the problem at hand.

Risks and their types – A considerable diversity of risks

Although in recent decades risk management has been focused on the financial industry, due to the well-known problems of the recent past involving such industry, attention should be drawn to a wider multitude of risks, many of them of a non-financial nature per se. One example is the issue of trust. Trust is not, stricto sensu, a financial issue, but it can dictate the fate of financial institutions because it can trigger chains of cause and effect, which in turn can negatively affect purely financial variables. In this sense, it is important to bear in mind the concept of tautology and not to confuse effects with causes, or vice versa. Confidence, a similar issue, can be a determining factor in a “race to the bank”, to extract funds, which in turn would further aggravate a hypothetical situation, under the effect of a vicious and catastrophic cycle originating from a lack of confidence.

The question then arises as to what risks shall be taken into account. Let us not forget that it took until the 17th century to start applying probability in a systematic way. Most organisations’ approach to risk is still superficial and unrelated to cause and effect ¹. This is related to our inability to estimate distant quantities in time and space, which may in turn be related to systems thinking not being as developed and widespread an area as would be desirable.

Organisations are systems; systems that need to be governed. Natural systems have evolved over thousands of years and, as such, are in relatively stable conditions. Human systems, including businesses and other organisations, are relatively young and their governance rules (policies) are often difficult to design and establish. In any case, the first step shall be the identification of the relevant variables, i.e. the typologies of risks to pay attention to.

A short definition of risk would be a situation or endeavour which may lead to adverse outcomes, caused by decisions we have made or a situation we are facing. Typically, their magnitude is measured in terms of two main parameters, the probability of occurrence and the impact it would cause. The risks faced by organisations must be managed, which consists of seeking their disappearance, their mitigation or end at their acceptance, but in no case should they be ignored. These risks can be classified into three broad types: avoidable, strategic, and external, each of which requires a different risk management approach ².

Avoidable risks. These are the risks to which an organisation is exposed by doing things wrongly and are usually caused by mistakes, lack of professionalism or inappropriate behaviour. The objective when considering these risks shall be to eliminate them (there is no strategic benefit in assuming them). The control approach regarding these risks is normally based on the establishment of adequate procedures on processes, internal control and audit systems, which will verify whether the controls put in place are sufficient and functioning. The board’s role in addressing such risks is overseeing the control model and following up on the arising action plans. If the board has an audit committee, this should be one of its main tasks.

External risks: This category of risks includes all those variables that can negatively affect a company and over which it has no influence. The objective, therefore, shall be to mitigate their impact. A global economic crisis, a natural disaster, or an epidemic are clear examples of this type of risk, which is one of the main causes of serious crises affecting companies. But if it is not possible to influence the variables that cause them or to foresee when and how they will occur, does the board have any role in their management? If so, what should this role be and how should it be carried out?

We know for sure that any company, sooner or later, will be impacted and step into crisis mode as a consequence of external risks. What is important for companies and their boards is not to try to predict the cause, but to concentrate on reducing its fragility. Boards have some procedures for managing them, but what is really important upstream is to assume that the management of external risks, and not just avoidable or strategic risks, should be part of the board’s agenda.

Strategic risks. The company is exposed to them when a business opportunity is pursued with the expectation of making a profit, as such a business opportunity involves uncertainties that may lead to failure. In these cases, the expectation of profit outweighs the risk of failure. In general, the greater the profit expectation, the greater the will to assume risks. The assumption of such risks is what gives life to capitalism, as it enables improbable initiatives and projects to be carried out, through which our world progresses. A historical example of risk-taking on an improbable project relevant for progress was the first globe circumnavigation (1519-1522) carried out by Magellan and Elcano, whose financing was sort of “public-private” (23% was paid for by merchants from Burgos and the rest by the crown).

The objective when managing these risks is to minimise them, i.e. to take the appropriate precautions to reduce, in a cost-efficient manner, their probability of occurrence and mitigate their impact in the event that they do occur and to learn from what has happened. In this case, the control of the risks assumed is based on analysis and discussion using different procedures and tools such as scenario planning, probability and impact maps of the identified risks as well as key risk indicators scorecards. The role of the board of directors, supervision and control, is crucial for the proper management of this type of risks, but how can this be done? Certain practices are effective within the dynamics of the board, such as:

• Asking timely questions and challenging the answers
• Defining a company’s acceptable level of strategic risk.

Ask appropriate questions and challenge the answers received:

This is one of the most important features of a good advisor. Monitoring risks involves:

1. Knowing the main strategic risks the company faces, their interrelationships, the probability and impact of their occurrence and the measures to be taken in such cases.
2. Identifying how the organisation’s main interest groups or stakeholders would be affected.
3. Ensuring that management remuneration systems, especially for top executives, do not incentivise undesirable risk-taking behaviour. There are many examples of this, and in many cases, with devastating outcomes.
4. Gathering relevant information from external sources (auditors, legal advisors, regulators, etc.) and, above all, internal sources. However, the ability of directors to obtain good internal information (sufficient, relevant, reliable, and timely) is often weak ³. It is clear that the chief executive can control both the information provided to directors and their access to the company’s management.
5. Spending time and effort in preparing the board meetings and actively participating in the sessions.

Define the company’s strategic risk level:

The board of directors must assess, clearly define and approve the level of risk appetite the company is willing to assume. To this end, directors need to be well aware of the pros and cons of establishing a lower or higher risk appetite, so there is no room for the all too frequent and surprising ex-post justifications (“we were not aware of…”, “in our industry it was common practice…”, “management never warned us of…,” etc.). Accepted risk tolerance need not be static and should be revisited as often as necessary, depending on the moment, the context, the sector and, the company.

The Business Policy Model and Risk Governance

The board’s job is to act in such a way that they can make the future situation of the company better than the current one, in relative terms. This requires, firstly, addressing the organisation holistically to ensure that undesirable side effects are minimised. Among the various possible approaches, António Valero and José Luís Lucas ⁵, proposed the Business Policy Model, a conceptual framework, which seeks to offer assistance to senior managers in their task of managing a company. They identified four areas of action on which the “governance action” of senior management is applied: (i) the Business; (ii) the Management Structure; (iii) Professional Commitment; and (iv) Institutional Configuration. Distinguishing these four aspects is useful in order to maintain a comprehensive perspective (Figure 1).

Choosing the business means deciding to carry out the content of particular activities or operations which, when harmoniously related, allow for an optimal evolution of the organisation’s results. Bringing people together and putting them to work is one of the basic pillars of management. Therefore, creating a directing structure means entrusting people with certain parts of what needs to be done to move the organisation forward. Through Professional Commitment, management seeks procedures that help people to do their work, ensuring the right incentives and motivation of the entire organisation is in alignment with the chosen strategy. After all, getting the people who make up the organisation to work professionally, proposing new ideas through creativity and knowledge, and promoting innovation, are some of the key tasks of a manager. Finally, the Institutional Configuration, which is key for the organisation sustainability over time, requires agreements between shareholders and stakeholders at large in relation to the levels of Initiative, Financing and Power, in order to be able to carry out the strategy. Each of these four areas can be impacted by risks in multiple ways. Since organisations are systems, it is useful to keep this concept in mind for good corporate governance.

Risk governance and the Business Policy Model

The board’s focus should be on strategic risks management instead of trying to cover all the risks that an enterprise risk management (ERM) system may suggest (risking “not being able to see the forest because of focusing on so many trees”). In this sense, it is useful to relate risks to each of the four governance areas of the enterprise policy model, as suggested below:

• How does risk X affect the company, and how does it relate to the management structure of the organisation?

• What is the relationship between professional commitment in the company and the incentive systems with respect to risk? Remember the case of incentive systems that induced less ethical behaviour in employees, in order to increase their scorings or even short-term performance bonuses? How is the professional culture of the organisation affected by risk?

• How does a certain institutional set-up aggravate corporate risks when facing certain typologies of risks? Does a certain financial structure of the organisation increase risk? How does the level of initiative and innovation affect sustainability and competitiveness in the future? And how does power affect or is affected by risks, in its various typologies?

To generate similar questions, it is useful to have a holistic model of organisations – a framework that facilitates the identification of risks, their mitigation, or even their transfer to third parties more qualified to deal with them.

For each of the four governance areas of the Business Policy Model, it is necessary to analyse how the three types of risk – avoidable, external and strategic – affect them (Table 1).

The above table is useful for the board for, at least, two good reasons: (1) it allows them to classify risks by company governance area, and (2) it allows them to seek the most appropriate solutions to manage the identified risks.

Summarising

The tasks to be addressed by the board of directors are essentially those that determine the prosperity and sustainability of their organisations. The board of directors may delegate its authority to the managing director or CEO, but it cannot delegate its responsibility for the actions of the company’s management, including accountability for the governance of risks that the company may face. In this sense, it is necessary to go beyond the focus on financial risks and pay more attention to any kind of risks that may be considered strategic, i.e. the kind of risk that can seriously damage the company or cause its collapse. In other words, compliance is necessary but not a sufficient condition in itself for excellence in risk governance, and having a comprehensive framework for risk governance is of great help.

About the Author

Pedro B. Agua is a Senior Manager and currently a Professor of General Management at the Portuguese Naval Academy and Senior Teaching Fellow at AESE Business School, Lisbon. Professor Agua has authored many articles and book chapters featuring various systems, governance and business policy subjects. Currently the Navy Research Centre Deputy Director, and NED at AFCEA Portugal, he combines his teaching profile with an extensive business background of more than 28 years dedicated to cutting-edge fields such as defence, telecommunications, and the subsea industry. Agua holds an MBA from AESE and IESE Business School and a Ph.D. in Engineering and Management awarded by the University of Lisbon.

References

1. Hubbard, D. W. (2009). The Failure of Risk Management. Why It’s Broken and How to Fix It. New Jersey: John Wiley & Sons, Inc.
2. Kaplan, R., and Mikes, A. (2012). Managing Risks: A New Framework. Harvard Business Review. June.
3. Água, P.B. (2021). Covering Blind Spots. The European Business Review. September.
4. Bromiley, P., and Rau, D. (2016). Strategic Risk Management. A Better Way of Managing Major Risks. IESE Insight. Issue 28, 1st Quarter.
5. Valero, A. and Lucas, J.L. (2018). Business Policy. Seville, Spain: San Telmo Ed.

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While it makes sense that governments should use social media for effective communication with the public in times of crisis, research suggests that they should understand that their well-intentioned efforts might actually have the effect of exacerbating the problem, rather than mitigating it.

When a crisis occurs (an economic recession, a natural disaster, a health emergency, or an armed conflict), it is essential to establish an appropriate communication process between central governments, emergency response agencies, and the public. The purpose of such communication must be twofold. At one end it must help intensify the efficiency of the emergency response teams. At the other, it must inform the population and contain public concern.

Today, a particularly intense period of simultaneous crises is touching our world. One of its most critical vectors is an unparalleled climate crisis. Global warming is the result of the increasing concentrations of greenhouse gases in the atmosphere. It jeopardises not only the natural environment but also economic stability by increasing both the frequency and intensity of natural disasters and weather extremes, threatening global food security. Combined with the increasing global inflation rate (the World Bank¹ estimates that almost 90 per cent of all countries have seen a food price inflation of over 5 per cent between April and June), it has immediate and long-term repercussions for society, leading to poverty and malnutrition.

The role of the government in attenuating such effects is fundamental. Public officers must find a way to organise regulatory responses that can reduce the impact of the crises while mitigating the fears of the population. To develop an efficient communication strategy, one must consider and understand matters of public concern and how public attention might react; otherwise, such communication may not have the expected impact, and it might even have the opposite effects, generating more concern and uncertainty. In our opinion, the moderating effect of public attention affects not only government agencies involved in disaster management, but any institution or large corporation implementing a sensitive communication strategy.

To better understand the behaviour of such communication, we produced an academic study that sought to understand the effects of social media activity and the interaction (either positive or negative) with public attention.

In this study, we analyse the relationship between the social media activity of government agencies involved in disaster management and the agricultural commodity market during a natural disaster or extreme weather conditions and the role that public attention towards global warming plays in intensifying or reducing such effects. Our research shows a significant relationship between social media activity and agricultural commodities futures prices. We also show that higher levels of public concern about global warming intensify the impact of social activity, provoking a more intense market reaction. We go on to explain the results of our study, while providing some insights into how government agencies may better control the impact of social media.

Crisis and use of social media

A natural catastrophe requires timely, targeted, and reliable information. This makes social media a far-reaching tool that facilitates transmission, engagement, and accessibility, at a relatively low cost. Given the high penetration rate across demographic groups², social media are increasingly being used as a primary source of news and information³, playing an instrumental role during emergencies, crises, and disasters⁴. Therefore, government agencies involved in crisis management have turned more than ever to social media platforms to alert the population, share information, and enable a two-way channel of communication.

Government communication effects on commodity prices

To explore the effect of social media communication, we analyse⁵ the use of Twitter by several government agencies involved in disaster management in the United States. For our analysis, we collected Twitter activity related to natural disasters and extreme weather conditions. We chose Twitter because is well established and widely used by government, emergency agencies, and first responders and because it is known as a source or reference of rapidly available information.

Our results indicate that when a crisis occurs, government agencies use social media as communication channels with targeted audiences. The higher the intensity of the natural disaster, the higher the social media activity and traffic, triggering public and market concern about the aftermath and potential losses. The threat of potential shortages and financial losses increases the demand for the commodity, as well as the hedging positions in the futures market, pushing up the commodity price. In other words, social media and trending topics related to natural disasters might act as public attention catalysts and enable a market reaction, leading to increasing demand for the commodity and hedging positions. In addition, our study shows that higher levels of economic policy uncertainty and public concern about global warming intensify the impact of social media communication.

What should governments, citizens, and companies do?

As our results conclude, social media are increasingly being used as a primary source of news and information. Higher levels of social media activity and traffic are associated with more severe natural disasters and extreme weather conditions and, in consequence, with deeper repercussions for the agricultural commodity market. This effect tends to be more pronounced during periods of high economic policy uncertainty and public concern about global warming.

The lessons gathered from our research allow us to provide two simple recommendations that should help to implement a resilient and efficient social media communication strategy.

1. Our first piece of advice is simple: “Gauge public concern.” Public attention plays an instrumental role in influencing and moderating the market reaction in periods of crisis. In particular, public attention and concern about global warming has been shown to intensify the impact of social media during periods of natural disasters and weather extremes. Equally important, government agencies involved in disaster management should take into consideration the economic environment when implementing a communication strategy, as higher levels of economic policy uncertainty are associated with deeper market reactions.
2. On the other hand, governments should start a practice of measuring the market reaction to each one of their communications. To our knowledge, there is no precise agency in charge of understanding the consequences of government social media behaviour for economic tendencies. We therefore suggest that governments (and companies) should start a data and information analysis practice, for which they can take advantage of academics and scholars that can perform objective inquiries. In following these two recommendations, they will be able to tame (and therefore reduce) the negative impact of such types of announcements on commodity prices and be more aware of the wording, hashtags, images, and overall content that provides a less excessive response of concern from the public.

This article was originally published on May 19, 2023.

About the Authors

Federico Platania is Full Professor at ISG INTERNATIONAL BUSINESS SCHOOL. He holds a PhD in Banking and Quantitative Finance jointly offered by the University Complutense of Madrid, University of the Basque Country, University of Valencia, and University of Castilla-La Mancha and a HDR (Habilitation à Diriger des Recherches) en Sciences de gestion from Aix Marseille Université. His research interests include the study of energy and agricultural markets, climate change, and information and communication technologies.

Celina Toscano it is a passionate professor currently working at ISC Business School in Paris and a PhD candidate at CY Université Paris Cergy. She is a curious person with an interdisciplinary spirit and the willingness and eagerness to explore different topics and opportunities in order to expand her research and teaching repertoire.

Fernanda Arreola is the Dean of Faculty & Research at ISC Paris. She is also a Professor of Strategy, Innovation & Entrepreneurship and a researcher focusing on service innovation, governance, and social entrepreneurship. Fernanda has held numerous managerial posts and possesses a range of international academic and professional experience.

References

1. Food Security Update | World Bank Response to Rising Food Insecurity. Last Updated: 13 March 2023. The World Bank. https://www.worldbank.org/en/topic/agriculture/brief/food-security-update
2. 2 The 2022 Social Media Demographics Guide. n.d. Khoros. https://khoros.com/resources/social-media-demographics-guide
3. 3 Exposure to opposing views on social media can increase political polarization. 28 August 2018. PNAS. https://www.pnas.org/doi/abs/10.1073/pnas.1804840115
4. 4 Social Media and Disasters: Current Uses, Future Options, and Policy Considerations. 6 September 2011. Congressional Research Service. https://mirror.explodie.org/CRS-Report-SocialMediaDisasters-Lindsay-SEP2011.pdf
5. 5 Social media communication during natural disasters and the impact on the agricultural market. Technological Forecasting and Social Change. June 2022. https://www.sciencedirect.com/science/article/abs/pii/S0040162522001263

The post Digital Communication and Public Concern During Natural Disasters. appeared first on The European Business Review.

The term “VUCA” is familiar to most of us as a convenient label to characterise our constantly changing world. But what practical steps can we take to operate effectively in this environment? Perhaps the answer lies in changing how we think about the future?

It’s often said that we live in a radically uncertain world that makes it difficult to foresee future directions of business development. In this kind of VUCA world, corporations operate in an uncertain, volatile, and fast-changing environment, where strategic management is challenging.

The VUCA concept has gained much attention and popularity as a way of describing the general vagueness of the business operating environment. It has become an umbrella term that captures the volatility, uncertainty, complexity, and ambiguity of our ever-changing and hard-to-predict world.

The VUCA acronym dates from the late 1980s when it was coined by the US military to describe the instability of the post-Cold-War world. The term later spread to the business world, where the concept was adopted to refer to the uncertainty of the operational environment. It became a catchphrase and metaphor for the ever-increasing difficulty of managing businesses in strategically uncertain environments.

The world today differs in many respects from the 1980s, when the VUCA concept was originally created. In the 2020s, there’s not much point or news value in saying that, from a strategic management point of view, business companies face a challenging and risky operating environment in the VUCA world. In many branches and industries, it’s taken for granted that the operating environment is in rapid and unpredictable flux and that it’s difficult to navigate.

Is there a future for the VUCA world?

The VUCA world is often discussed as a single, coherent phenomenon. However, there exists no such thing as a VUCA world. Rather, it represents one way of approaching concepts and phenomena related to environmental uncertainty.

To better understand the VUCA world as a whole, we need to understand the specificities of its component parts and to emphasise their differences and interrelations, rather than look at them as one single cluster. In practice, the VUCA world consists of four distinct and different phenomena that require four different organisational responses.

First, volatility refers to rapid, sudden, and unpredictable changes in the environment. Typically, the problems are unexpected, and it is not known how long they will last. Although they may come about by surprise, the problems are not usually difficult to understand.

The second dimension, uncertainty, describes circumstances where there is a shortage of information about the situation, even though the causes and consequences of events may to some extent be understood. To dispel the uncertainty, it’s necessary to take steps to collect and interpret information. For example, information will be needed about change drivers such as technological development, industry and market changes, shifts in consumer behaviour, and changes in politics and values.

Complexity is the third dimension. It refers to the presence of multiple interconnected variables. There is a reasonable amount of information about the complex situation, and it is possible to predict how it is going to unfold, but not with great depth or consistency. It is essential to collect new information to be able to create a new understanding in a seemingly complex environment.

And fourth, ambiguity, means that the situation is open to interpretation and can have multiple meanings. It’s also difficult to understand the patterns of interactions within the situation. Collecting new information will not go very far toward solving ambiguity problems, because it’s often not known what information is relevant and what is not.

To have a profound understanding of the phenomenon, we examined the research literature on the VUCA world and found that the concept is quite superficial and general. The VUCA acronym is mostly accepted at face value as an easily identifiable catchphrase for the changes happening in the operating environment and the importance of those changes. The VUCA world is a more or less random assembly of concepts describing the uncertainty of the operating environment and related phenomena collated under one umbrella.

In our study, we understood that there are two ways to approach the state of the VUCA concept. The first option is to concede that the VUCA term and its analyses are outdated and have limited significance. This would mean that, in the absence of any efforts to develop the concept, VUCA would begin to fade and fall into oblivion.

On the other hand, it is clear that even though the concept offers a quite shallow framework to understand these issues, it addresses an important and current phenomenon about which we need to know more. One of the critical values of the concept of the VUCA world lies in its providing a framework for discussing phenomena related to environmental uncertainties and their meaning for business development and strategic management.

That is why the second option is more constructive. We should take a practical view of how to develop and elaborate VUCA so that the concept would be of actual use to strategic thinking and to achieve a deeper and more diverse understanding of how our uncertain world is changing.

In our analysis, we found that literature on the VUCA world does not have very much to offer for strategic management or management practices. The observations made and conclusions drawn in the research literature had only little practical relevance for the managers and organisations of the future. Thus, we need to develop a more concrete and practical understanding of how to thrive in the VUCA world.

Critical capabilities of the future

Developing foresight capabilities provides a significant opportunity for solving practical questions related to strategic uncertainty. It also supports organisations in identifying and seizing new possibilities raised by uncertainty. How to proceed, then?
Businesses and industries differ widely, and therefore it is challenging to offer a single recipe or universal set of guidelines for strategic management in an uncertain world. The approaches and solutions suited to each company depend largely on the future development of their specific operating environment.

However, the role of foresight is bound to increase in times of uncertainty. Developing foresight capabilities will help companies meet the challenges raised by the VUCA world.

Foresight capabilities help companies anticipate future disruptions and recognise opportunities presented by uncertainty, providing crucial support for innovation and business growth. An insightful understanding of future changes in the operating environment will also facilitate ongoing discussion about the company’s strategic assumptions, objectives, and direction. In addition, foresight supports innovation and the search for new business opportunities, organisational renewal, and strategic agility.

Foresight capabilities and practices provide valuable tools for understanding and processing uncertainty. Our research identified two separate but interconnected approaches to foresight capabilities, which are especially valuable in the VUCA world: alternative futures and futures literacy. The former emphasises the organisation’s systematic approach to foresight, and the latter emphasises future thinking skills.
The alternative futures approach is grounded on the premise that, in the VUCA world, it is not possible to base decision-making and action on prior experiences of similar situations. The more uncertain the operating environment, the harder it is in the new situation to draw on decision-making models based on previous experience.

The uncertainty of the VUCA world complicates the challenge of defining clear strategic paths, plans, and roadmaps. Companies have less clear information about the operating environment and its driving forces. Therefore, it is important that they integrate foresight of the operating environment more closely as part of their strategy work. At the same time, management must be able to create a shared understanding of how phenomena of the VUCA world impact upon strategy work and what kind of threats and opportunities they entail.

In these circumstances, the key is to ensure that the organisation has the ability to create and simulate future scenarios that it can use in its decision-making and in developing its operations. In a fast-changing world, it’s also essential to have the flexibility to change and shift between different future scenarios. This is a critical risk for decision-making in the VUCA world.

Another foresight approach to the VUCA world is to emphasise futures literacy as a meta-skill that can bring a more in-depth consciousness about the content of assumptions about the future and in this way improve the practices of strategic decision-making. As in the case of alternative futures, futures literacy implies that, to succeed in the VUCA world, the organisation should not latch itself on to individual future forecasts but use foresight as an approach to developing its capacity to navigate uncertainty. Futures literacy is first and foremost about reversing the perspective, so that the aim and purpose of foresight is not so much to describe the future but rather to serve as a tool of learning.

Strategic decision-making is based on shared visions of the future. By analysing and reflecting upon views and assumptions about the future, the organisation can be more open towards alternative ways of thinking about the company’s and the operating environment’s future. This implies a shift in the organisation’s approach towards more active future-shaping.

In the VUCA world, organisations need foresight capabilities, such as the ability to picture alternative scenarios and to question their own assumptions about future directions. In addition, organisations need management models and practices that are grounded in futures thinking. They can steer organisations to challenge and question current ways of thinking and break down traditional assumptions. Identifying and utilising new emergent opportunities is crucial for innovation, renewal, and growth.

The article is based on the authors’ research project at VTT Technical Research Centre of Finland.

About the Authors

Nando Malmelin, PhD, works at consulting agency Capful as a Head of Renewal. He is also an Associate Professor at the University of Helsinki. Malmelin has published extensively on leadership, creativity, organisational renewal, and strategic thinking.

Sofi Kurki, PhD, is a Senior Scientist at VTT Technical Research Centre of Finland. Kurki is an expert in corporate foresight, foresight methods, futures studies, and societal development.

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The Importance of Preparation

A major pillar of dealing with corporate catastrophes is preparation. Unexpected occurrences can be greatly diminished in impact by planning for them in advance and anticipating potential dangers. Taking a proactive approach to identify vulnerabilities within your business and its surrounding ecosystem is crucial. Conducting comprehensive risk assessments, reviewing insurance coverage, and implementing preventive measures are key steps to minimize disruptions. By having a well-defined disaster preparedness plan, businesses can better protect their assets, mitigate potential losses, and swiftly respond when disaster strikes. To further strengthen your preparedness, establish clear protocols for different scenarios. Assign responsibilities to key personnel and conduct regular training sessions to ensure everyone understands their roles and knows how to respond effectively. This level of preparation will foster a sense of confidence within your organization and enable a swift and coordinated response in times of crisis.

Effective Communication Strategies: Building Trust and Unity

During a business disaster, effective communication becomes even more critical. Building trust and preserving relationships with stakeholders depends heavily on timely and open communication. Regardless of whether they are partners, suppliers, consumers, or workers, everyone has to be informed and confident that their issues are being taken care of. Create a thorough communication plan that addresses both internal and external messaging. Internally, establish clear channels for disseminating updates and instructions to employees. Regular communication through emails, meetings, and internal newsletters can keep the workforce informed and alleviate stress. Encourage open dialogue, provide opportunities for employees to ask questions, and address their concerns promptly.

The Role of Expert Assistance

Australia, renowned for its skilled professionals, offers a wealth of reliable services for businesses in need. In times of crisis, seeking professional expertise can be invaluable. Should your business encounter an electrical emergency, for example, engaging a qualified electrician from Sydney can ensure the safety of your premises and minimize further damage. Their expertise, combined with a swift response, can help restore operations faster, ensuring minimal disruption to your business. By leveraging the knowledge and experience of experts, businesses can tackle specific challenges with precision and efficiency, enhancing their chances of a successful recovery. Furthermore, consider establishing relationships with key service providers and suppliers in advance. Having established connections can expedite the process of securing necessary resources and support during a crisis. Collaborating with reputable professionals in areas such as legal services, IT support, and public relations can ensure that you have the right expertise readily available when needed. These partnerships can prove to be invaluable in navigating through complex situations and finding tailored solutions to unique challenges.

Financial Planning and Flexibility

Business disasters often come hand in hand with financial implications. Having a well-defined financial plan is essential for navigating through such crises. This includes building emergency funds, reviewing insurance policies, and exploring financial alternatives. Begin by assessing your current financial situation and identifying potential areas of vulnerability. Set aside emergency funds specifically designated for unexpected events. These funds can provide a safety net during times of crisis and enable you to cover immediate expenses while working towards recovery.

Learning from the Experience

Dealing with a company catastrophe may be a life-changing event. It is essential to think back on the lessons you’ve learned and assess how well your reaction tactics worked once you’ve brought the issue under control. You may discover a lot of areas for improvement and adjust your disaster preparedness strategy as necessary by conducting a review. Engage in a comprehensive review of the crisis management procedures that were implemented. Evaluate the efficiency of the decision-making, reaction, and communication processes. Create plans to proactively resolve any gaps or bottlenecks you find. This evaluation will help strengthen your future response capabilities and refine your disaster preparedness plan.

While business disasters can be overwhelming, they also present opportunities for growth and transformation. Businesses may get through difficult times and secure their future by putting preparedness first, setting up efficient communication lines, getting professional help when necessary, adopting smart financial planning, and encouraging a culture of learning. Resilience and flexibility are crucial traits that can significantly impact whether or not a calamity can be used as a springboard for success. Businesses may emerge more powerful, resilient, and better equipped to confront problems in the future with proper preparation and a proactive approach.

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Before diving into the tips, it’s important to understand what crisis management is. Simply put, crisis management is the process of preparing for, responding to, and recovering from unforeseen events or emergencies that can impact your business. These events can take many forms, including natural disasters, issues with your premises, cyber attacks, product recalls, or even negative social media posts. A good crisis management plan can help you minimize the impact of these events and protect your business and reputation. Not only will it help you identify all the possible risks, it will enable you to plan for your response in each scenario, whether you need to find an emergency plumber in Houston, a PR professional in New York, or an IT expert to help you regain control of your systems after a cyber attack. So here are 12 tips to help you develop a crisis management plan.

1. Identify Potential Risks and Hazards

The first step in developing a crisis management plan is to identify potential risks and hazards that your business may face. This can include natural disasters, safety hazards, cyberattacks, regulatory issues, and more. Conduct a comprehensive risk assessment and ensure all stakeholders are involved in the process. Remember smaller risks too, such as an issue with the plumbing in your building, or internet outages. Small problems can quickly become big problems if they mean you cannot operate your business as usual.

2. Determine the Potential Impact and Severity of Each Risk

Once you have identified potential risks, determine the potential impact each risk could have on your business. Consider how much it could cost your business, how much you could lose in terms of revenue, and the extent of potential damage to your reputation. Crisis management plans often take the form of detailed spreadsheets, so you can go through all the risks methodically to assign the risk factors.

3. Develop a Communication Plan

Communication is essential during a crisis, and establishing a communication plan is critical to ensure everyone involved is aware of what is happening and how to respond. Identify who will be involved in communication, what channels will be used, and the key messages that need to be communicated to stakeholders. If there’s a chance you’ll need to make statements to the media or in another public forum, consider who will do this, and get them some media training to ensure they can handle the situation professionally.

4. Appoint a Crisis Management Team

Establishing a crisis management team can help ensure that the plan is executed effectively. The team should include representatives from key areas of the business, including HR, legal, marketing, and public relations. You’ll also need to ensure staff from across your company understand the crisis management plan, and how they can help in the event of a crisis. 

5. Establish Clear Roles and Responsibilities

Assign specific roles and responsibilities to each member of the crisis management team. Clearly define the expectations and duties of each assigned member, so they can go about their tasks without any confusion. If you might need staff to work extra hours in the event of a crisis, make this clear up front, and even consider including this in their contracts – including how they will be reimbursed for their time.

6. Develop a Contingency Plan

A contingency plan outlines the steps that your organization will take should the crisis plan fail. Consider all possible scenarios and prepare accordingly, ensuring that every base is covered. If you’re struggling to think through all the possible scenarios, get some experts in to guide you through the process. Organization and forward planning makes a huge difference in a crisis.

7. Create an Incident Response Plan

An incident response plan outlines how your organization will respond to a specific crisis. It should include specific actions and steps that need to be taken during the crisis, and should also include potential scenarios, such as evacuation or shelter in place protocols. You should also have a roster of emergency contacts within the plan, such as emergency plumbers and electricians, as well as high profile stakeholders who will need to be informed.

8. Conduct Crisis Management Training

It’s essential to ensure that all members of the crisis management team are trained in how to respond to a crisis. Workshops, drills, and simulated exercises can help fine tune the plan and ensure that all team members are well prepared. Many companies have an annual crisis practice day, where they are assigned a crisis and the team assembles and responds as if it was real.

9. Develop a Crisis Communication Strategy

A crisis communication strategy outlines the type and timing of communication that will take place in different phases of a crisis. The plan should include steps to address different stakeholders, including employees, vendors, customers, and shareholders. This goes a step further than the communication plan, as it aims to predict the long term impact of a particular crisis, and how this can be mitigated through a good strategy.

10. Monitor Social Media

Social media can often act as an immediate communication channel during a crisis. Ensure tools are in place to monitor social media and negative news coverage surrounding an incident. Know how you will react to certain types of posts in a crisis, as staying silent can often make a situation worse. Equally, social may be a valuable tool to communicate with staff and customers in certain types of crisis situations.

11. Review and Update your Plan Regularly

A crisis management plan should be reviewed and updated regularly. This will ensure that it stays current and relevant and includes new risks that may have arisen. Make sure you know who has responsibility for this, and how frequently it will be reviewed.

12. Test your Crisis Management Plan

Finally, test your crisis management plan regularly through exercises and drills to ensure that it will perform as expected. This will help identify gaps in the plan, opportunities for improvement, and increase the confidence of your team. As well as a crisis response day annually, there can be smaller drills to test the plan. For example, the social media team can plan different types of responses they would give in particular scenarios. They could even test these responses with small focus groups to see if they can make any improvements.

Planning is the cornerstone of business success, and developing a crisis management plan is no exception. By following these tips, you can establish a comprehensive plan that will help you respond to crises with confidence. Remember, it’s never too early to plan for the worst and arm your business against unexpected events!

The post 12 Tips to Develop a Crisis Management Plan for Your Small Business appeared first on The European Business Review.

While they may not be able to prevent pending economic crises such as those resulting from the COVID-19 pandemic, businesses can use them as launch pads to growth by becoming resilient and doubling down on growth instead of cutting costs.

Worried about a crisis? You might think it’s coming if you add in the Ukrainian war, inflation, a remnant COVID-19 pandemic, and burgeoning private debt. But in reality, there is also a bright picture to contrast with this bleak outlook in that the war may soon be over, China has reopened its economy, and inflation is levelling off slightly in some parts of the world.

Rather than spending too much time guessing at the next crisis, its size, nature, and timing, business leaders should instead teach their organisations to become resilient. In analysing the numbers from numerous crises, including research conducted in cooperation with Accenture Research at the time of the COVID-19 pandemic, we have discovered three important elements for leaders to take notice of.

The first is that resilience, or the ability to bounce back, is both a rare and long process. Brands like Hertz, JCPenney, and J.Crew went out of business in the first few months of the COVID-19 pandemic. In previous crises, 17% of publicly traded companies have gone public, either because they went bankrupt, went private again, or were bought out. And while most firms survived, it took between 1.5 and 3 years for firms and economies as a whole to recover the losses incurred during a major shock.

The second insight is that crises often redefine the status quo, with new winners emerging, and old winners becoming new losers. The falling angels are numerous, about 25% of total companies, but new rising stars are also visible. In fact, the idea is that resilience is a strategic complement to do better than before the crisis: what academics call bouncing “forward”. Resilient companies are those that use the crisis as an opportunity. Remember Andy Grove, then CEO of Intel, when he said that “crises make great companies better? At the time, Intel nearly collapsed because of a bug in the Intel Pentium processor. In fixing the bug, Intel also radically reinvented its partner ecosystem, while developing its Intel Inside Program that allowed the company to rebound and dominate the semiconductor market for years.

A final point concerns the ingredients for resilience and performance. Many studies, including consulting firms, will preach the virtue of agility, the ability to innovate or, the need to digitise. But the reality is more subtle than that. If a leader wants resilience to drive the new trajectory of his or her company, that same company will need to invest in the entire portfolio of capabilities (agility, innovation, digitisation, sustainability, and flexible work practices). And the best time to do so is during a crisis –precisely when rivals are scared, retreating, and overly focused on survival, instead of preparing for the next competitive battle. As Winston Churchill once said, “a good crisis should not be wasted.”

In practice, however, the typical company has a narrow set of capabilities and tends to retrench during a crisis. Winners are already preparing for the next crisis, and are eager to invest in difficult times when rivals have morphed into victims of turbulence. Best companies are not necessarily good at predicting crises, rather they focus on excelling in rising, and not falling, when the crises hit. Are you that breed?

This article is originally published on May 16, 2023.

About the Author

Jacques Bughin is CEO of machaonadvisory, and a former professor of Management while retired from McKinsey as senior partner and director of the McKinsey Global Institute. He advises Antler and Fortino Capital, two major VC/PE firms, and serves on the board of multiple companies.

References

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• Bughin, J., Berjoan, S., Hintermann, F. and Y. Wong, (2021), Is this Time Different? Corporate Resilience in the Age of COVID-19, In-cite, working paper, Solvay Business School, June.
• Gulati, R., N. Nohria, and F. Wohlgezogen (2010), Roaring Out of Recession, Harvard Business Review, March.
• Hirsch, S. (2018). Succeeding in the Long Run: A Meta-regression Analysis of Persistent Corporate Earnings. Journal of Economic Surveys, 32(1), 23-49.
• Mann, M., & Byun, S. E. (2017). Retrenchment or Investment? Recovery Strategies in a Recession. Journal of Business Research, 80, 24-34.
• Maury, B. (2018). Sustainable Competitive Advantage and Profitability Persistence: Sources versus Outcomes for Assessing Advantage. Journal of Business Research, 84, 100-113.
• Ollagnier, J.M, Berjoan, S., Bughin, J. and Xiong, Y. (2021) Why Fixing the Planet is Also About Seizing Business Opportunities, European Business Review, March.
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• Teece, D., Peteraf, M., and S. Leih, (2016). Dynamic Capabilities and Organizational Agility: Risk, Uncertainty, and Strategy in the Innovation Economy. California Management Review, 58(4), 13-35.

The post Resilience Is More than Being Able to Rebound: It Should Be Used As a Competitive Advantage appeared first on The European Business Review.

Industrial unrest is escalating across Europe.  In recent months there have been dockworker strikes in Germany, and industrial action by teachers, health, oil and transport workers in France.  Thousands of Spanish workers recently took part in a mass protest to demand higher pay.   The UK has been particularly badly hit, with significant disruption to the rail, telecommunications, postal and legal industry, and staff across the UK’s health sector are now engaged in industrial action.

In its 2022 Guide to European Strikes and Industrial Action, legal experts Eversheds Sutherlands report on several new and emerging trends, including disputes involving international, not just national issues, and trade unions and workers collaborating across borders.  

What is behind this avalanche of industrial unrest?  What do organizations need to do to restore harmony, re-establish good working relationships with their staff and reduce the costly disruption being caused to their operations?

A complex picture

A number of factors have combined to produce the fractured industrial relations landscape we currently find ourselves in. A combination of political and economic instability, the cost-of-living crisis and the impact of the war in Ukraine have created a ticking industrial relations ‘time bomb’.  

But it’s not just external factors that are leading to this widespread breakdown in employer-employee relations.  The lack of an effective infrastructure in our organizations for resolving labor disputes is also a key factor.  Leaders have been lulled into a false sense of security by the relatively stable industrial relations we have seen over the past 20 years, and in many cases have failed to renew (or put in place), the important partnership agreements and social contracts that are designed to act as a guide for the way disputes get resolved.  

In the absence of these agreements, communication between management, HR and unions breaks down and problems that could be resolved by compassionate, collaborative, face-to-face dialogue are allowed to escalate.  Discussions tip over into bitter and angry exchanges, positions become entrenched and before too long, unions are calling their members out on strike, because they perceive there is no alternative way forward.

This industrial relations impasse is also a reflection of the way organizations tend to deal with any form of workplace conflict – whether unions are involved or not.  Leaders are relying on damaging and divisive formal grievance policies and punitive performance management processes, which are out of date, and out of place in the emerging agile and hybrid world of work.  Cultures have become increasingly toxic and the social contract that exists between employers and their people has broken down. 

Constructive dialogue

Whilst I fully support employees’ right to withdraw labor if they feel they are being treated unjustly, industrial action is a sign of a failed industrial and employee relations landscape.  Dig beneath the surface of any dispute, and you will generally find deep-rooted cultural and systemic issues which should have been dealt with long before the spectre of a strike emerged.  

Ultimately, the only way any dispute is resolved is for the parties to engage in the 3 P’s of good industrial relations – purposeful, positive and proactive dialogue.  In other words, unions and employers need to get around the table, engage in constructive dialogue and compromise until they can find consensus and identify a way forward.  This is not a comfortable or easy process, particularly when a situation becomes highly adversarial and parties are attempting to work together amidst a surrounding media circus.

This is where seeking the help of independent, third party mediators can help.  These objective and neutral facilitators can often help both sides step away from the brink and emerge with their pride (and the organization) intact.

They can help the parties involve understand that they do have a choice.  They can choose to walk away from rhetoric and brinkmanship and engage positively with each other.  They can seek to fully understand each other’s position, address the underlying needs and fears that are at the root of the dispute and find a bridge that will lead them to a solution.

It’s never too late to embrace this approach and resolve issues through dialogue – because dialogue is, after all, the only way a conflict will ever truly be resolved.

Organizations need to take urgent action to stop themselves sleepwalking into a very serious breakdown in industrial relations – which as we have seen in the past, can precipitate social unrest.

We need to transform the way we approach industrial relations.  That starts by organizations treating conflict management, of all types, as a strategic priority.  They need to make time for serious reflection about the culture and climate they are creating for their workforce – and think about how they can shift to a people-focused, values-led, fair and just approach, which puts compassion, collaboration and above all constructive dialogue front and centre.

The clock is ticking. If these critical conversations are left any longer, the issues will become more and more difficult to resolve and organizations will fail to build the happy, healthy and harmonious workplaces they need to succeed in these challenging times.

This article is originally published on December 11, 2022.

About the Author

David Liddle is CEO of The TCM Group and founding president of the Institute of Organizational Dynamics. He is the author of the newly published book Transformational Culture (Kogan Page).

The post How Organisations Should Prepare to Face Increasing Industrial Unrest? appeared first on The European Business Review.

Companies must be prepared to handle any potential crisis that may arise during this time, whether it’s negative publicity related to sponsorship deals, security issues at live events, or employee behavior problems. By having a comprehensive crisis management plan in place and implementing effective strategies for monitoring and responding to potential crises, companies can minimize the impact of any negative events and maintain their reputation and credibility in the eyes of customers and stakeholders.

Potential Crises during March Madness

During March Madness, companies face a host of potential crises that could harm their reputation and financial stability. One of the most common issues that companies must contend with during this time is negative publicity. Companies that sponsor or advertise during March Madness may find themselves in hot water if a player or team they’re associated with is involved in a scandal or controversy. For example, if a player is accused of cheating, using drugs, or engaging in other illegal or unethical behavior, the company that sponsors them may suffer from negative publicity and backlash from customers and stakeholders.

Security is another concern for companies during March Madness. The large crowds and high-profile nature of the event can create security challenges, especially in and around the arenas where games are played. Companies that operate in the vicinity of the arenas or that are involved in event logistics may need to be particularly vigilant about security threats during this time. Any incidents that occur could cause significant damage to the company’s reputation and financial stability.

Employee behavior is another potential crisis that companies must be prepared to manage during March Madness. With so much excitement and activity surrounding the event, it’s not uncommon for employees to become overly enthusiastic or to engage in inappropriate behavior. Companies must be proactive in setting clear guidelines and expectations for employee behavior during this time to prevent any issues from arising.

Finally, companies may need to be prepared to deal with logistical issues related to the event. For example, if a company is involved in transportation or hospitality services, they may need to deal with last-minute changes or disruptions to their operations. Companies must have contingency plans in place to manage any logistical issues that arise, so that they can continue to provide high-quality services to customers and avoid any negative impact on their reputation.

Strategies for Effective Crisis Management

Due to the nature of the event, March Madness is definitely no stranger to controversies. To effectively manage a crisis during March Madness, companies must have a well-designed crisis management plan in place. This plan should outline the steps that the company will take to identify, evaluate, and respond to a crisis. The plan should also clearly designate the roles and responsibilities of different team members, including those responsible for communication, logistics, and decision-making.

One key strategy for effective crisis management is to stay vigilant and proactive in monitoring for potential issues. This means regularly monitoring social media, news outlets, and other sources for any signs of trouble, such as negative press coverage, rumors, or other potential issues. By staying aware of potential issues, companies can take steps to address them before they escalate into full-blown crises.

One key strategy is to stay vigilant and proactive in monitoring for potential issues. To give an example from a broader context, in the case of a blackjack tournament, organizers must stay aware of potential issues that could arise during the event, such as cheating or disputes among players. In general, such concerns are non-issues in the case of online blackjack, hence the growing popularity of the online platforms which you can view more about here. But, since we’re dealing with a very specific example of March Madness here, it’s important to note the key issues.

Communication is another essential strategy for effective crisis management. Companies must have clear and consistent communication channels in place to keep stakeholders informed about the situation and any steps being taken to address it. This includes regular updates to customers, employees, and other key stakeholders via email, social media, press releases, and other communication channels.

Companies must also be prepared to make difficult decisions quickly and decisively during a crisis. This may involve making tough choices about whether to continue with planned events or marketing efforts, or to cancel or modify them in response to the crisis. In making these decisions, companies should prioritize the safety and well-being of their stakeholders and the overall reputation of the organization.

Conclusion

In conclusion, managing crises during high-profile events such as March Madness requires a well-designed crisis management plan that takes into account the unique characteristics of the event and potential crises that could arise. Event organizers must stay vigilant, proactive, and communicate effectively to ensure that all stakeholders are informed and engaged throughout the process. Quick and decisive decision-making is also crucial in managing crises and prioritizing the safety and reputation of the event. Finally, after the crisis has been resolved, a thorough review process should be conducted to identify areas for improvement and ensure that the crisis management plan is updated and remains effective for future events. By implementing these strategies, event organizers can effectively manage crises and maintain the success and reputation of their events.

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The spokesperson for the department has expressed concerns that the 2023-24 allocation does not recognise the one-off decision made last year to use Translink reserves to help maintain services. They argue that the allocation does not reflect the additional funding needed for energy and inflation.

The budget constraints have forced the department to look for ways to save money, including turning off streetlights and reducing public transport services. The cost of street lighting has increased fourfold due to rising energy prices. 

The department has already taken some measures to reduce expenditure and raise revenue, including increasing Translink fares, increasing on-street car park charges in Belfast, Lisburn and Newry, and increasing non-domestic water and sewerage charges. In addition, Translink and Northern Ireland Water have been able to deliver additional savings of £19m.

The remaining resource deficit is over £100m, and the department is considering several options to reduce this debt. These options include scenarios such as no road gritting service provided this winter, reduced water and wastewater treatment services, reduced funding for community transport, and emergency-only services for road maintenance and flood management. The department’s capital allocation is £146m less than what it would have required.

The spokesperson for the DfI said that the department is facing extremely difficult and unprecedented circumstances. The Department of Agriculture, Environment, and Rural Affairs (Daera) has also been affected by budget cuts. Its allocation will result in a 1.5% cut to its day-to-day spending budget. 

The allocation includes ring-fenced funding of £327.2m for agriculture, agri-environment, and the wider rural economy and £3.1m for fisheries. The funding cannot be used for other purposes. Daera has also faced significant financial pressures associated with the cost-of-living crisis, the rise in bovine TB and other factors.

The budget pressures could also undermine attempts to tackle Northern Ireland’s waiting list problem. The Department of Health has warned that the budget leaves it about £470m short of estimated requirements for this financial year. 

The waiting list initiative, which has included creating additional in-house health service capacity over and above normal day-to-day work, as well as paying independent sector providers to assess and treat patients, could be affected by cost-saving measures under consideration. Northern Ireland has the worst waiting list figures in the UK, with approximately 378,000 patients waiting for a first consultant-led outpatient appointment.

The department has told MLAs that its budget is essentially flat in cash terms compared to last year, but it faces additional financial pressures. The cost of meeting health service pay claims is estimated to be £375m, which is the biggest pressure on the department’s budget. 

Under the budget settlement, it will not be possible to resolve the current pay dispute. As a result, the department is warning of high-impact cuts. Measures being considered include reducing nursing and residential care placements, restricting domiciliary care packages, and reducing payments for support services provided by the voluntary sector. No final decisions have been taken on what measures to implement.

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Rock tours attract millions of fans each year around the world. But are concertgoers aware of the logistics involved in pulling off impressive concerts? Gilles Paché offers an overview of a fascinating topic that deserves more attention from researchers and practitioners.

While the COVID-19 pandemic put a major halt on rock tours for more than a year, now is the time for legendary bands and singers to return to the stage, after having experimented with virtual concerts on Web 2.0 platforms1 instead of the traditional live gigs. Just like the restoration of a “new normal” in companies, 2023 is a return to the big tours for dozens of artists and bands in the United States2. More broadly, the entertainment industry, including major sporting and cultural events, is experiencing an economic renaissance, as evidenced by the popular success of the 2022 World Cup football tournament in Qatar. If the public is now accustomed to seeing the impressive images of thousands of fans gathered in a stadium for the concert of a famous band, it does not suspect that worldwide tours are the result of the perfect coordination of hundreds of people, a prerequisite for a total ‒ and successful ‒ experience for fans. To illustrate the “logistical overkill” and the stakes involved, one of the best examples is undoubtedly the Rammstein Stadium tour.

The tour of the German metal band, with its “sulphurous” reputation, uses 180 semi-trailers, more than 1,000 tons of equipment, and two stages 230 feet wide and 130 feet high. It is the biggest rock tour in the world, organised in two sequences, from May to August 2019, then from May 2022 to August 2023, for a total of 104 concerts in Europe and North America with exceptional attendance (including 80,000 people at the Song Festival Grounds in Tallinn, Estonia, on 20 July 2022). Each concert ties up a stadium for 10 consecutive days, while setting up the stage requires seven days of work and the presence of 300 technicians. As for the concert itself, the pyrotechnic effects lead to the burning of 265 gallons of fuel oil per evening, to which must be added the electrical consumption of the 2,000-light shows and 370 music speakers. With the seven Boeing 747 aircraft used to transport all the material, we are very far from the Reise, Reise tour in 2004 and 2005, which had required Rammstein to employ “only” 10 to 13 semi-trailers.

When thousands of fans attend a rock concert, can they imagine the remarkable organisation required for the band or artist to perform? In fact, it is enough to look at the stage, the musicians, or the light shows to realise that first-class event logistics had to be implemented to transport and handle all the equipment. The admiration of the fan who is also an aficionado of logistics will be even stronger when they learn that the band or the artist will reproduce the concert 500 miles away the next day, then 1,000 miles away the day after. In brief, city after city, a rock tour requires strict planning of the moving of goods and people, and the coordination of supply chain operations could be even more complex given that a delay in the delivery of musical instruments or an incident could cancel a concert. In Marseille (south of France), the memory is still vivid of the collapse during its assembly in July 2009 of the roof of the stage planned for a Madonna concert of the Sticky & Sweet tour, causing the death of two technicians and the final cancellation of the concert, as a result of the very tight schedule of the subsequent dates. Behind the human drama, the complexity and fragility of the rock tour supply chains are revealed. But what do they really cover?

Moving goods and people

A rock tour is based on a series of concerts performed by an artist or a band in different cities in the same country or in different countries3. Obviously, the volume of a tour varies greatly, and it is not possible to compare a series of a few intimate concerts in halls of 1,000 people with gigantic concerts of a hundred dates in monumental stadiums that can accommodate up to 80,000 people. In the second case, we are dealing with truly multinational events operating on a large scale and managing massive flows whose sequencing of concerts is based on rigorous planning of operations and associated teams. The supply chain associated with the entertainment industry is traditionally subject to specific constraints compared to other, more conventional supply chains, with very little tolerance for delivery delays and scheduling errors. Indeed, each different piece of equipment transported is crucial to the performance of the concert. Thus, it is impossible to imagine that a Rolling Stones or Genesis concert could be held without a set of drums, or that the fans should be asked to come back the next day, when the drums will finally have arrived at their destination, as may happen during occasional stock-outs in a store4.

The transport technologies available at a given moment are at the heart of the management of the operations of a rock tour, and the difficulties are increased when it is necessary to cross borders, with customs clearance phases conducted quickly. The supply chain difficulties linked to transport are the loss of products, their damage, delivery delays, and the lack of security of the flows. To remedy this, the quality of service required by the organisation of a rock tour implies the use of appropriate means of transport. On the ground, special trucks with padded walls and corners are systematically used to protect the (very fragile) equipment. In the air, the use of large Antonov or Boeing 747 aircraft is preferred, but the new generation of aircraft have weight restrictions and smaller doors, which sometimes makes them unsuitable for rock tour supply chain organisation. This reality is not well known by fans, and when aircraft are used, it is more usual to hear about the travels of rock stars, the most famous example being the different aircraft used by the Rolling Stones over the years and decorated with the famous tongue (see illustration 1).

Illustration 1. The public face of transportation:
the example of the Rolling Stones’ aircraft and its famous tongue

When all the equipment arrives at a concert venue, it is unloaded and set up in a predetermined order that never changes: rigging, set, lighting, video system, and audio system. The instruments are the last to be moved onto the stage, and after the concert, everything is repacked in reverse order. But rock tour logistics should not be limited to the management of the physical flow of equipment necessary for the stage performance. One of the particularities of rock tours is that they involve a lot of people whose movements must also be organised from site to site, in reference to a succession of dates chosen according to their economic potential (the number of fans who reside in the trading area, which can be several hundred miles, depending on the country and the fame of the artist or the band). It is not uncommon for rock tours to rely on crews of more than 100 to 150 people, including riggers, carpenters, caterers, security guards, technicians, electricians, and drivers. It is easy to imagine the stakes in terms of accommodation and catering.

Implementation of overcapacity

If the supply chain associated with rock tours emphasises the importance of the volumes to be handled and transported, the major point remains the continuous pressure on the management of the operations. When the price of a ticket is several hundred euros, which does not cool the ardour of the superfans5, it is not possible to cancel the concert because of poorly synchronised supply chain operations that result in a delay in the delivery of one or more essential elements. To cope with such pressure, the solution chosen for the largest tours is the implementation of a systematic overcapacity, otherwise known as “operational slack”. Following Jay Bourgeois III 6:31, it is possible to speak of a “cushion of actual or potential resources which allows an organisation to adapt successfully to internal pressures for adjustment or to external pressures for change in policy, as well as to initiate changes in strategy with respect to the external environment”. In concrete terms, two platforms are used: when one team has finished preparing the concert in city A, a second team starts preparing the next concert in city B.

The case of U2’s 360° tour between June 2009 and July 2011 is impressive because it used three stages for more than two years (the set-up time of each stage was four days), and consequently three supply chain teams: one team working at the concert site; one team dismantling the stage from the previous concert; and one team setting up the stage at the next concert site (see illustration 2). In total, 189 trucks transported the different scenes (390 tons of material), using 380 drivers; 12 buses were also used to manage the 550 people associated with the 360° tour. Even if this rock tour remains an exceptional event, as much in its duration as in its pharaonic dimensions, with a scenic structure resembling a giant spider, it constitutes an emblematic representation of the complexity of the event logistics, which should not weaken in the next years in an experiential stream. Indeed, rock tours must give the fans a unique and memorable experience, with the use of a gigantic stage that has nothing to do with the ultra-minimalist Beatles concerts of the 1960s, with a reduced stage and four musicians playing for only about 30 minutes⁷.

Illustration 2. A partial view of the U2’s 360° tour logistics

The example of the three stages of U2’s 360° tour should not be considered aberrant, as it is in line with the principles of behavioural theory. Overcapacity is the excess of actual or potential resources that help an organisation to overcome internal or external pressures, as indicated by Jay Bourgeois III, facilitating its adaptation when there is a strong time constraint. The presence of a quantity of resources that exceeds the minimum necessary to achieve a given level of production of a service improves reaction capacity and, therefore, customer satisfaction. Harvey Leibenstein explicitly talks about a slack that is essential to the “good life” of an organisation, which he calls “X-efficiency”8. The existence of several stages fits perfectly into this type of analysis, since it reduces the pressure on the teams at the end of a concert to dismantle and transport the equipment to the next city. Without this slack, artists or bands would probably have to reduce the number of dates offered to fans, which would negatively impact their satisfaction, especially with a significant increase in the distance to travel to participate in the unique and memorable experience that is the concert.

Importance of planning

However, it would be wrong to think that the implementation of logistics overcapacities makes operations planning unnecessary. The logistics of rock tours require an upstream definition of all supply activities, with the identification of the various critical tasks whose non-performance ‒ or delayed performance ‒ could block the supply chain, and consequently the execution of the concert in the various locations that have been selected. The organisation of a tour is therefore based on a negotiation process linked to the acquisition of logistical resources from specialised partners, which is comparable to the situation of commercial supply chains. For example, the Averitt company offers customised supply chain solutions based on 100 drivers for OTL 53-feet trailers specially equipped for the entertainment industry (for example, see the description of Drake’s Summer Sixteen tour by Mark Solomon9). This negotiation to obtain logistical resources essential to the development of the succession of concerts is a key element to create the conditions for totally successful control in the sequencing of supply chain operations.

It should not be forgotten that one of the major problems of rock tours is linked to the equipment that must be handled and transported over long distances, under special safety and protection conditions. Accordingly, rock tours, especially when they take place on several continents, rely on excellent project management, which consists of designing and executing a set of operations to obtain a specific result. All project management is subject to the following three constraints: the technical specifications of the project; the material and immaterial resources required to carry it out; and the imperative respect of the deadlines for delivery. This is the case for rock tours, which rely on a set of processes throughout the life cycle, from the launch phase (beginning of the tour) to the closing phase (end of the tour). For rock tours, there is also the consistency of the quality of the infrastructure used. With increasingly elaborate tour productions and strictly timed concerts, the infrastructure is a decisive factor for the fastest-possible assembly and disassembly of the scenic structure.

While logistical planning is essential to avoid last-minute “bricolage”, in other words making do with the means at hand in an emergency, it does not prevent unexpected difficulties due to an unfavourable environment. This was the case for Coldplay’s Music of the Spheres tour in 2022. Faced with the climate challenge, to which its young fans are very sensitive, the band organised sophisticated logistics to offer an “eco-responsible” tour, with the use of solar panels, a portable battery, and a kinetic floor. In addition, as well as the biodegradable confetti and eco-cups used during the concerts, the audience was invited to pedal to generate green energy and allow the concert to continue. However, Coldplay acknowledged huge supply chain problems as, in trying to make their tour green, the band quickly ran into difficulties transporting equipment at an acceptable cost. An interruption of the Music of the Spheres tour was considered, before unexpected sponsors prevented a financial crisis and allowed the tour to continue. This example is interesting because it highlights the fact that the issue of implementing sustainable supply chains affects the entertainment industry as much as the retailing and manufacturing industries and, for that reason, knowledge transfers are of obvious interest.

A key topic to be explored

Rock tours attract millions of fans each year around the world. But are they aware of the logistics involved in pulling off impressive concerts? Indeed, for a rock tour to succeed, it requires the transport of a lot of goods, with the teams in charge of handling them, but also of assembling and disassembling the different elements of the stage structure every day. These teams must be fed and housed city after city, requiring efficient hospitality management. In comparison, transporting 25 tons of fruit and vegetables from Spain to Norway or importing 40 containers of toys from China is “a piece of cake”. A rock tour lasting several months or even years requires moving huge scenic structure, fragile musical instruments, hundreds of costumes, and giant video screens. Of course, when a rock tour is launched, there is no room for delays, damage, or scheduling errors. Each leg of the tour must be tailored to the specific laws and customs regulations of each country, which can be very demanding.

Paradoxically, the rock tour supply chain has not been tackled head-on by management research, which leaves the field open to carry out work in cultural economics, sociology, musicology, or ethnology, as if the management of rock tour flows over several hundred thousand miles did not raise any specific issues. It is surprising when we learn that, in the late 2010s, the various tours of the Rolling Stones since 1962 had led the band to travel more than a million miles, or 43 times around the Earth! However, the specific constraints associated with tours are undeniable, and they deserve special attention. It is enough to consult Google Scholar to see the very low number of works dedicated to the rock tour supply chain stakes; an example is the recent doctoral dissertation of Gabrielle Kielich in communication studies10, and the almost total absence of academic articles published in the best world journals in logistics and SCM. This lack of interest is regrettable and is undoubtedly rooted in a purely “artistic” vision of rock tours, for which “the stewardship will follow” (“l’intendance suivra”), to quote General de Gaulle’s famous sentence. At best, some observers think vaguely that the logistics can be outsourced in total confidence to specialised competent logistical partners like Averitt.

This approach cannot be satisfactory when we consider the economic benefits of rock tours, especially for the cities hosting the concerts (even if it remains difficult to quantify these benefits precisely; for example, the fans’ spending on food products and accommodation at the concert venue). Even more importantly, significant business opportunities exist, especially for graduate students who have chosen to specialise in supply chain management. This field of event logistics can attract talent, because it offers a stimulating environment that would, for example, allow bright students to link their passion for music with their job, because finally, as the philosopher Georg Wilhelm Friedrich Hegel11:22 wrote, “Without passion nothing great in the world has been accomplished.” By way of comparison, for many years, MBA programmes in sports management have been developed in Europe to feed the professional sports sector, especially football. Tens of thousands of students passionate about sports are trained in marketing, finance, HRM, or management control to improve the governance of well-known clubs. This is not yet the case for the logistics management of rock tours. A word to the wise!

About the Author

Gilles Paché is Professor of Marketing and Supply Chain Management at Aix-Marseille University, and Director of Research at the CERGAM Lab in Aix-en-Provence, France. He has more than 600 publications in the forms of journal papers, books, edited books, edited proceedings, edited special issues, book chapters, conference papers and reports, including the recent two books La société malade de la Covid-19: regards logistiques croisés (2021), and Variations sur la consommation et la distribution: individus, expériences, systèmes (2022).

References

1. Rendell, J. (2021). “Staying in, rocking out: online live music portal shows during the coronavirus pandemic”. Convergence, Vol. 27, No. 4, pp. 1092-111.
2. Anonymous (2023). “Concert season is here: upcoming music tours in the USA”. The European Business Review, 10 February. https://www.europeanbusinessreview.com/concert-season-is-here-upcoming-music-tours-in-the-usa/
3. Reynolds, A. (2022). The live music business: management and production of concerts and festivals. Routledge, New York, 3rd ed.
4. Chishty, M.-A., Loya, S., Ismail, S., and Zaidi, H. (2015). “Consumer response in out-of-stock situation at a retail store”. International Journal of Humanities & Social Science, Vol. 5, No. 3, pp. 180-8.
5. Anonymous (2022). “How much money does it take to be a music superfan in the UK?”. The European Business Review, 19 September. https://www.europeanbusinessreview.com/how-much-money-does-it-take-to-be-a-music-superfan-in-the-uk/
6. Bourgeois III, J. (1981). “On the measurement of organisational slack”. Academy of Management Review, Vol. 6, No. 1, pp. 29-39.
7. Cottet, P., and Paché, G. (2022). “Living a memorable consumer experience: the epic of the Beatles concerts (1963-1966)”. Journal of Marketing Development & Competitiveness, Vol. 16, No. 3, pp. 33-47.
8. Leibenstein, H. (1978). General X-efficiency theory and economic development. Oxford University Press, New York.
9. Solomon, M. (2019). “Rock, roll and the road: how trucker guys and gals bring the music”. Freight Waves, 16 July. https://www.freightwaves.com/news/rock-roll-and-the-road-how-trucker-guys-and-gals-bring-the-music
10. Kielich, G. (2021). Road crews and the everyday life of live music. Unpublished doctoral dissertation in Communication Studies, McGill University, Montreal.
11. Hegel, G.-W.-F. (1857/2011). Lectures on the philosophy of history. WordBridge Publishing, Aalten.

The post On the Road Again: Putting the Rock Tour Supply Chain on Music appeared first on The European Business Review.

Financial Health

The most common challenge that associations face is financial health. Associations are non-profit organizations, but they must still generate revenue in order to operate and provide the best possible service for members. This means that associations need to find the best ways to generate revenue, such as:

• Membership fees
• Hosting events
• Paid content
• Merchandise
• Certification programs

In addition to finding ways to generate revenue, an association will also have to create a budget and carefully monitor cash flow to avoid running into financial difficulties.

Attracting Members

Of course, it is important to attract members to your association to generate revenue but also so that you can grow. There are a number of ways to attract new members, but few are as effective as creating a job board. People tend to join associations so that they can reach the next levels in their careers, so a job board will allow them to find new opportunities and take the next step. There is job board software for associations that you can use that should help you to attract new members and reach higher levels of success with your association.

Retaining Members

It is important to attract members, but you also need to make sure that you retain members so that you have reliable income each month. The key here is keeping your members happy, so you need to make sure that they are benefiting from membership and have the support and resources that they need to advance their careers. It is also a good idea to seek feedback, make continuous improvements, and find ways to engage with your members.

Public Relations

A notable challenge for associations is public relations. Associations are often called upon to advocate for their members during contentious issues, which means that they can suffer from bad PR. This is why it is important for associations to find ways to develop a positive reputation, such as building up relationships with the media and policymakers.

Tech Trends

As with any kind of organization, associations can benefit greatly from the use of tech. Tech can be used in all kinds of ways to improve the association, but it is also challenging to keep up with the latest tech trends. There are so many different technologies that it can be hard to determine what is best for your association, plus the financial constraints can make it challenging.

These are some of the most common challenges that associations face, and hopefully, this information will help you to prepare and manage these challenges.

The post Common Challenges Faced by Associations appeared first on The European Business Review.

A broken fire alarm system can put a lot of lives and property in danger. That’s why having professional fire watch guards on-site is crucial when a business’s alarm system breaks down or is temporarily out of commission.

They Monitor Fire Alarm Systems/Sprinklers

A business with fire alarm systems/sprinklers should ensure they are up and running at all times. Otherwise, they risk fire outbreaks that can destroy the business and its valuable assets.

There are several reasons why these systems go down, including construction and other building renovations. A fire watch service can provide around-the-clock coverage to protect your property from a possible fire hazard.

These professionals can also evaluate fire protection equipment and determine what needs to be repaired or replaced. This will save your business from losing money, many human lives, and equipment.

The fire guards patrol can be a lifesaver in the event of a fire, as they will be on the lookout for any potential hazards. They can also help occupants evacuate the building if necessary.

Fire watch security guards are highly trained in patrol techniques and can help your business stay safe. They will watch for suspicious behavior and report any incidents to local authorities as required by law.

They Monitor Other Safety Equipment

Taking fire watch guard services can benefit commercial businesses with a high risk of fire outbreaks. These buildings and facilities could be vulnerable to a fire because of aging wiring, trash containers that contain combustible materials, or overheating equipment.

A fire is one of the most devastating and costly hazards that a business can face. It can destroy a building’s structure, property, and even people.

If a business does not have fire protection measures in place, it can be susceptible to fines or penalties. A fire watch service can help a business stay compliant and avoid these fines and penalties.

These professionals will conduct regular patrols to identify any potential fire threats. They will also ensure that all emergency exits are clear and that firefighting equipment is in working order. 

They Monitor Construction Sites

Construction sites are notorious for theft, which can cost a business a lot of money regarding materials and equipment. Luckily, remote monitoring and security cameras can quickly stop thieves from entering your building site.

The best construction site surveillance cameras are easy to set up and operate. They are designed to work seamlessly with any tablet or smartphone, and they offer AI-supported video analytics that can help you search for people and objects in real time.

Having a security camera on your building site also helps reduce the risk of accidents and injuries that could occur if people are distracted by other activities. This can save your business a lot of money on medical bills and employee compensation claims.

Construction sites can be dangerous places; if something goes wrong, it can take a long time to get back on track with the project timeline. The visuals provided by remote construction site monitoring can be used to keep track of progress on any internet-enabled device, saving you a lot of time and money in the process.

They Help You Stay Compliant

The efficiency of your business depends on smooth operating processes that are well-planned and properly executed. Likewise, your company’s reputation is built upon how well it does in the eyes of your customers and clients.

Workplace fire outbreaks are common and can result in massive losses to profit, property, and life. Fortunately, many of these fires could have been prevented if proper safety protocols had been followed.

In commercial businesses, fire watch guards help you minimize the risk of these incidents. They maintain your fire suppression equipment, identify fire hazards, secure a perimeter or entire site from a potential fire outbreak, and keep a detailed log of daily activities.

Fire watch guards also help you stay compliant by following all rules and regulations required by safety permits. Moreover, a good guard will keep inspection logs that you can submit to insurance companies or governing bodies to show proof of compliance.

The post Why Fire Watch Guards Services Should Be Taken in Commercial Businesses? appeared first on The European Business Review.

1. Provide Protective Equipment

To ensure workers do not get injured at work, the personal injury law firm Donaldson & Weston suggests that employers provide them with essential protective equipment. Among the best methods to avoid personal injuries at the workplace is wearing the proper footwear. The right footwear can help prevent tripping, slipping, or injuring your toes. Business owners can avoid slip and fall injuries by asking their employees to wear appropriate footwear, such as closed-toe or rigid shoes, non-slip sneakers, and shoes with adequate ankle support.

2. Educate Employees on Safety at the Workplace

You can be held liable as a business owner if your employee gets injured on the job. To protect you and your business, it’s essential to take measures to avert workplace accidents. Among the most effective steps is to educate your employees on workplace well-being, which can be effected through:

• Safety manuals
• Safety training sessions and seminars
• Posting warnings and signs in the workplace

By implementing these measures, business owners help to build a safe work atmosphere for employees and minimize the risk of lawsuits for workplace injuries.

3. Have a Safety and Health Guide

Also, every workplace should possess a safety and health guide. Besides having the legal procedures to be followed to guarantee workers’ safety, the safety and health guide should have clear instructions for your particular workplace. While it’s essential to write the manual, it is equally important that employees read and understand the manual. Therefore, you should offer in-person safety and health training to complement the guide content.

4. Implement all Relevant Safety Regulations

Every business is required to implement applicable safety regulations. The regulations protect customers, employees, and the public from injuries. When employees follow these regulations, they avoid injuries and accidents from happening. Some essential safety regulations for businesses include:

• Building codes
• Fire codes
• OSHA (Occupational Safety and Health Administration) standards

By adhering to the regulations, business owners create a safe environment for their customers and employees and evade a personal injury lawsuit.

5. Maintain an Orderly Workplace

Inadequate housekeeping can lead to serious safety and health hazards. Your office layout should have enough footpath markings, be debris-free, and have stations for clearing spills.

There should also be regular equipment maintenance to improve safety and reduce costs. Many machines need frequent maintenance, such as parts replacement, lubrication, and cleaning. Equipment in poor working condition may malfunction during use, damaging other devices, nearby employees, or products. Frequent inspections ensure that repairs are done before an injury happens.

Final Word

While it’s advisable to observe all the measures above, you should also have liability insurance. This is coverage to protect you if an employee or a customer sues your company for damages. Liability insurance is vital if your business is high-risk, such as a construction company or a restaurant. If someone sues you for injuries obtained at your business premises, contact a personal injury lawyer for advice and direction.

The post How Business Owners Can Prevent Personal Injuries appeared first on The European Business Review.

High-risk industries

First aid training is a critical component of workplace safety. A recent study found that one in five workplace fatalities could be avoided by properly using first aid.

A good training program helps employees become more aware of risks, and helps employers reduce incidents and costs. This can also improve employee retention.

First aid training can be delivered online and can be tailored to suit a specific site, industry, or risk management plan. It is also a great way to build team relationships.

For example, if you work in a manufacturing environment, you might be particularly prone to heart attacks. First aid and CPR training can be focused on the work setting and should be updated regularly. So, first aid at work certification is important for you. 

For high-risk industries, such as construction, there are more steps to take. For example, contractors on construction sites must provide training documentation. And in some industries, such as manufacturing, a trained first aid responder is a legal requirement.

In addition to regular first aid training, it is important to assess your company’s health and safety risks. You may need to increase the number of first-aiders in your organization. Or, you may only need to provide adequate first aid equipment.

Tailoring your first aid training program to the needs of the workplace

If you’re an employer, you must ensure your workers have access to first aid training. A comprehensive program that covers both lifesaving and non-lifesaving skills can help improve the health and safety of your workforce. In addition, a robust safety program can enhance your overall working environment, cultivating a positive, healthy relationship with your employees.

Many businesses provide basic first-aid training to their employees. However, not all of them are aware of how they can tailor their training to fit the needs of their workplace. To determine what your specific needs are, it’s important to identify the risks you face and design a safe and effective first aid program.

First aid training can be conducted on-site, or online. The latter allows you to easily tailor modules to your particular industry. It can also be helpful to get employee input. This can help you understand your employees’ concerns and gauge your training’s effectiveness.

First aid training should include an evaluation of the incident scene and the victim’s physical condition. You should also learn how to manage shock and administer CPR.

Learning about CPR

Learning about CPR during first aid training is important at work. Not all medical emergencies require emergency medical services (EMS) but there are many situations in which it is beneficial to know how to help an injured person until EMS arrives.

First aid training is important because it can prevent problems that could make a situation worse. It can also increase your confidence in assisting. Aside from helping you maintain your health; it can also benefit your fellow employees.

The American Heart Association estimates that nearly 400,000 people die every year from sudden cardiac arrest. These events are often unexpected. Many of these victims have no prior knowledge of heart disease and may not even know that they require medical attention.

Everyone willing to obtain lifesaving skills can take an online CPR course at the American CPR Care Association. The latter offers digital and printable certifications to those who successfully complete the courses. With AHA-compliant course materials, you can ensure that the lessons learned will be up-to-date and relevant.

CPR and other first aid training can help you save a life. You may be at a business or public event when the unfortunate incident happens. This is especially true if you are not familiar with the area. Knowing basic first aid skills can ease the stress of the incident and speed up the healing process.

Taking care of yourself during first aid training

First aid training in the workplace can help you save lives. It can also reduce the time it takes to recover from a medical emergency. Employees who are trained in first aid can provide the help they need to a patient until EMS or other emergency care arrives.

Every worker faces various risks at work. Injuries can range from cuts, stings, and temperature extremes to musculoskeletal injuries. Some accidents can be life-threatening, such as a trip to a high-rise building or a fall from an open ledge.

The most important part of ensuring a safe work environment is a solid safety plan. An effective plan can include regular training that reinforces information and keeps employees aware of new hazards and best practices.

First aid training in the workplace can benefit both employees and the organization. Knowing that there are trained people on-hand to respond to an emergency can boost staff morale and productivity.

Employers are required by OSHA to assess their work and design a first aid program. This includes choosing a program and determining which staff needs to be trained.

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The war in Ukraine is a major geopolitical crisis whose first economic repercussions, particularly in terms of inflation, were quickly felt in Europe. Looking further ahead, the resulting disruption in supply systems could give rise to new models of industrial organization. Will the Ukrainian crisis lead to a ‘regionalization’ of global value chains?

The Covid-19 health crisis underlined the impact of an external shock on the supply systems of retailing and manufacturing companies, as we reported in a 2022 article¹. For example, recurring stockouts and a sharp increase in delivery times have led to deteriorating customer service levels. Not surprisingly, the Ukrainian crisis is in turn highlighting dysfunctional supply of raw materials, components, and commodities, as Ebru Orhan’ analysis points out². Europe is now obliged to find alternative sources to those historically coming from Russia (including the famous gas), but also from Ukraine. The presence of global value chains amplifies the problems, with shortages spreading much more quickly over entire continents like a tsunami.

In their article published in March 2022, David Simchi-Levi and Pierre Haren cite the case of neon gas, used massively in the manufacture of semiconductor chips³. Ukraine supplies about 50% of the world’s neon gas, which highlights the magnitude of future shortages in the event of a multi-year conflict. The effects of other shortages have also been felt since the spring of 2022. For example, Volkswagen and BMW have been forced to reduce their production levels due to a shortage of electrical harnesses, as Ukrainian suppliers have stopped making and therefore delivering them. This has resulted in queues of several months to get access to a new vehicle, a situation that was almost unthinkable even ten years ago. An ‘old world’ seems to be collapsing before our eyes, paving the way for what could be a new, post-crisis world, which is shrinking back to local geographical areas.

A predictable inflationary drift

The impact of the war in Ukraine on supply systems is considerable, with major consequences on the procurement costs of raw materials, components, and commodities. In highly competitive industries, such as automotive and smartphone industry, the competitive advantage built up over decades is under threat. For example, while it is essential for the manufacturing of catalytic converters, the price of palladium rose as early as January 2022, when diplomatic tensions increased, and it literally exploded a few days after the start of the war in Ukraine. Figure 1 shows its evolution, compared to that of gold and platinum, to highlight the extraordinary convergence of trends.

There are dozens of other examples of soaring prices and, by mechanical effect, a return to a period of high inflation that is reaching dramatic peaks in a country like the United Kingdom. Observers have discovered that European aluminium production is highly dependent on alumina imports from Russia. As early as March 2022, the price of a ton of aluminium traded above 3,400 US dollars for the first time, up from 2,400 US dollars at the end of 2021, just two months earlier. Since manufacturers have little inventory on hand, a direct result of their just-in-time policy, the impact is almost immediate for many convenience goods, such as soft drink cans. The surge in the price of materials and components is further compounded by a drying up of supply while demand remains high in the wake of the Covid-19 crisis.

The main reason for this critical situation is Russia’s historical specialisation in the energy and metal sectors, which are largely located upstream of the value chains. Disruptions in supplies from Russia therefore spread down the value chains to European countries whose companies have specialised in assembly activities. Given that Russian inputs are involved in a very large number of value chains, the implications could be long-lasting in Europe. From this point of view, the recent finding of Deborah Winkler and her colleagues is not optimistic: value chains that rely heavily on inputs from Russia include a very wide range of goods from transport equipment to machine tools, micro-electronics, and food⁴.

Supply systems under strain

Faced with the external shock of Russia’s invasion of Ukraine and its effects on global value chains, the first reaction of European companies was to find alternative solutions that did not fundamentally challenge their supply systems. Building on their recent experience with the Covid-19 pandemic, most companies have continued to implement adaptive approaches, including developing new risk management practices more quickly and increasing their stocks of critical components and commodities. European states have also chosen the same path, filling up their strategic gas stocks to the maximum before the winter of 2022. But these emergency measures conceal profound changes to come, the effects of which are difficult to measure for the moment.

Tobias Korn and Henry Stemmler offer a thought-provoking analysis of what the ‘world after’ might look like⁵. Their reasoning focuses on the long-term consequences of the war in Ukraine on supply systems. They do this by looking at the impact that past civil wars have had on the organisation and functioning of global value chains, using the classification of civil wars proposed by the Uppsala Conflict Data Program. What do the two researchers find? Their analysis shows that importers react to supply disruptions from a country at war by increasing imports from other countries at peace. Substitution of suppliers is most obvious and fastest for agricultural products and minerals. For manufactured goods, changes in the supply system take time and are likely to be implemented during conflicts that last several years, in an irreversible way.

If we follow this argument, which is particularly well constructed statistically, it is likely that the reconfiguration of global value chains following the war in Ukraine, as is the case at the end of a civil war, will produce a profound reorganisation of supply systems, favouring new suppliers who might not have been selected without the presence of the war.

In short, the situation since the end of February 2022 is undoubtedly conducive to a radical transformation of value chains. We should not draw the conclusion that regionalised value chains will triumph in the future, as Christopher Tang’s article suggests⁶. The situation will probably be more nuanced, with the presence of global value chains based on totally different ranges of action from those that were dominant even ten years ago, and which are superimposed on each other.

Towards a multipolar world

One thing is clear: beyond the purely technological questions, it will undoubtedly be necessary to consider a more ‘geopolitical’ approach to the construction and operation of value chains. For several decades, researchers and practitioners have been emphasising the importance of new technologies as facilitators of globalised and unhindered exchanges. This is particularly true of blockchain, which has given rise to the publication of several hundred thousand academic papers. Numerous works are devoted to it, particularly to underline the capacity of the blockchain, a real miracle of modern times, to create the necessary trust to make the members of the supply chain collaborate, while guaranteeing the security, tracking/tracing and confidentiality of data.

Even if blockchain facilitates exchanges between companies located in the four corners of the planet, the war in Ukraine reminds us of the importance of geopolitical issues that significantly disrupt the functioning of value chains. Although technologies have enabled us to make a great leap forward in terms of performance, we had collectively forgotten that the desire to control resources, including by force, makes these technologies very fragile. It is thus possible that the war in Ukraine, the outcome of which no one can predict in the autumn of 2022, will lead to a significant contraction of trade relations only between countries sharing the same ‘humanist values.’ But who can say with certainty that a country sharing common values with us today will not become hostile tomorrow, following a radical change of political regime? In other words, we have entered a time of great instability, a world that will be ‘more contested’ by 2040, as the subtitle of the latest CIA report puts it.

It is clear that the conflict between Ukraine and Russia is profoundly disrupting supply systems. But the situation could be much more dramatic if a major geopolitical crisis broke out between China, Taiwan and the United States. In addition to the fact that China has become the world’s workshop for convenience goods, Figure 2 shows that it also produces an impressive number of rare and strategic metals. The European Commission drew attention to this fact long before the Ukrainian crisis, but it takes on a special flavour in 2022. However, it cannot really be said that China shares common values with Europe, particularly in terms of human rights, and under these conditions, who could say that China will participate in a regionalised value chain that includes Europe?

Great uncertainties ahead

Having just emerged from the Covid-19 pandemic, Western countries were faced with a new external shock of formidable intensity: the war between Ukraine and Russia. As with the pandemic, this shock affected the functioning of many global value chains, whether in the food, chemical, automotive or electronics industries. No one can say when the situation will allow for a return to calm, if ever. A recent Dun & Bradstreet report points out that Russia and Ukraine are major exporters of some of the world’s most important commodities: 374,000 companies worldwide use Russian suppliers, and 240,000 companies use Ukrainian suppliers⁷. It is easy to imagine the catastrophic consequences of war on thousands of global value chains.

Already, response strategies are being suggested to top managers to mitigate the impact of the conflict on global value chains. One of the most common recommendations is to develop alternative sources of supply, to secure upstream flows in order to continue to supply downstream BtoB and BtoC markets (household consumption which may recover rapidly after the crisis). This is the case of Boeing and Airbus for titanium, as underlined by Sarah Schiffling and Nikolaos Valantasis Kanellos⁸. In the long term, the creation of a portfolio of local suppliers is increasingly systematically encouraged, which is perfectly in line with the ‘regionalisation’ of global value chains. It must be recognised that this development would in fact be a revolution in the face of professional buyers who had become, in the 1990s, unconditional followers of global sourcing, in the image of Carlos Ghosn’s practices.

It is often said that the word ‘crisis’ refers to both a sudden event, a rupture, but also to a long evolution that highlights the structural weaknesses of an economic, political or social system. A crisis is ultimately characterised by a break in the stability of a system, in search of a new stability. History teaches us that the crises of industrial societies are linked to an imbalance between production and solvent demand, before becoming increasingly financial phenomena, when bank failures or stock market crashes precede the activity drop, as was the case during the 1929 great depression or the 2007-2008 recession. There is little doubt that the war in Ukraine is a major crisis that will force us to think about a new organisation of supply systems. If there is any ‘virtue’ to be found in this war, it is that it will force us to completely revise a business model whose limits have been in full view since 2020. It is very sad to note that the price to be paid is tens of thousands of deaths on Europe’s doorstep.

About the Author

Gilles Paché is Professor of Marketing and Supply Chain Management at Aix-Marseille University, and Director of Research at the CERGAM Lab, in Aix-en-Provence, France. He has more than 600 publications in the forms of journal papers, books, edited books, edited proceedings, edited special issues, book chapters, conference papers and reports, including the recent two books ‘La société malade de la Covid-19: regards logistiques croisés’ (2021), and ‘Variations sur la consommation et la distribution: individus, expériences, systèmes’ (2022).

References

1. Paché, G. (2022). Living with shortages in the post-Covid world. Crisis Response Journal, Vol. 17, No. 1, pp. 64-66.
2. Orhan, E. (2022). The effects of the Russia-Ukraine war on global trade. Journal of International Trade, Logistics & Law, Vol. 8, No. 1, pp. 141-146.
3. Simchi-Levi, D., Haren, P. (2022). How the war in Ukraine is further disrupting global supply chains. Harvard Business Review [online], March 17. Available on: https://hbr.org/2022/03/how-the-war-in-ukraine-is-further-disrupting-global-supply-chains
4. Winkler, D., Wuester, L., Knight, D. (2022). The effects of Russia’s global value chain participation. In Ruta, M. (Ed.), The impact of the war in Ukraine on global trade and investment. The World Bank, Washington DC, pp. 57-79.
5. Korn, T., Stemmler, H. (2022). Russia’s war against Ukraine might persistently shift global supply chains. VoxEU CEPR [online], March 31. Available on: https://voxeu.org/article/russias-war-against-ukraine-might-persistently-shift-global-supply-chains
6. Tang, C. (2022). It’s about time to build regional supply chains. Industry Week [online], March 30. Available on: https://www.industryweek.com/supply-chain/article/21237601/its-about-time-to-build-regional-supply-chains
7. Dun & Bradstreet (2022). Russia-Ukraine crisis: implications for the global economy and businesses. Special Report, Jacksonville (FL).
8. Schiffling, S., Valantasis Kanellos, N (2022). Five essential commodities that will be hit by war in Ukraine. The Conversation [online], February 24. Available on: https://theconversation.com/five-essential-commodities-that-will-be-hit-by-war-in-ukraine-177845

The post The Rise and Fall of Supply Systems: From Global to Regional? appeared first on The European Business Review.

Out of the 74,230 households who were found to be homeless or threatened with homelessness, 25,610 of these were households with children.

Is the rising cost of living the biggest factor or is it the lack of new housing and social housing supply? Over 1 million households in England are currently waiting for Social Housing and with Social housebuilding in England being at its lowest rate in decades, patterns are starting to emerge.

Since 1991, there has been an average annual net loss of 24,000 social homes. The Government’s ambition is to build 300,000 new homes per year, with around half of these being built for Social housing. Despite this, only 216,000 new homes were supplied in 2020/21.

Open Property Group Managing Director, Jason Harris-Cohen said:  

“The figures surrounding homelessness are more than worrying, especially as they do not reflect the immediate cost of living crisis. It really is a double-pronged attack, with a reduction in available social housing and a crisis in the private rental sector.

In March 2022, a report revealed tenants in the UK spent 42% of their take-home wages on private rent. If you calculated that figure today, it will have risen as rents have become more expensive every month since the report was released. With spiralling energy bills, fuel costs that remain stubbornly high and an Autumn Statement from the Government that points to tax hikes, simply earning a wage isn’t enough to survive.

Even for private sector tenants who are just managing to cover their costs, the threat of homelessness can come from a different source. A recent survey by Cherry Plc found 28% of landlords questioned are planning to sell their properties, with the potential for thousands of tenants to be made homeless. In fact, the loss of a private tenancy is the second leading trigger of homelessness in England.

It is a dangerous cycle to be in. An increasing number of homeless tenants will be chasing a decreasing number of available private rental properties as more landlords look to sell up and exit. Tenants unable to find an alternative place to rent – or find they can’t afford rising rents – will then discover the pitfalls of the social housing sector. A ‘lose-lose’ situation will emerge.

The Government’s forthcoming rent cap in the social housing sector does nothing to address the homelessness crisis as you actually have to be in a property to benefit from the initiative. The focus needs to shift in two directions. Firstly, there needs to be an aggressive social housing build programme, which must include traditional council houses that can be offered to the most in need first. 

Secondly, more must be done to keep current landlords in the private rental sector as a supply and demand imbalance creates havoc. When a mass of landlords sell up, it leads to higher rents, less choice and increased homelessness. The Government should reverse some of the punitive landlord measures it has introduced, starting by reinstating mortgage interest tax relief and they should strongly consider scrapping the additional stamp duty bill on second home purchases.” We hope that with more stability in UK bond markets, we will continue to see more competitiveness in bank lending rates, although we anticipate that base rate set by the Bank of England will rise further.” 

About Open Property Group

Open Property Group are a professional house buying company who help people sell their properties quickly. They buy all types of properties, in any condition, throughout England and Wales.

Homeowners can sell house fast with a completion date fixed to the owners’ requirements. By selling directly, you pay no agent fees, ‎and can plan ahead with certainty. We also pay your agreed legal costs too. In the rest of the world, particularly in the United States, the issue of homelessness has also been a significant concern. The challenges of homelessness and managing makeshift settlements, commonly known as homeless encampments, are pressing issues. These encampments are a visible result of the growing homelessness crisis, fueled by rising housing costs, lack of affordable housing options, and various social issues. To address this complex problem, cities need to adopt compassionate and comprehensive solutions in addition to focusing on Homeless Encampment Cleanups. These cleanups, when conducted with sensitivity and support, can help address immediate sanitation and public health concerns in the affected areas, making them safer for both the unhoused individuals and the broader community. However, it is crucial that such cleanups are accompanied by sustainable and long-term measures that address the underlying causes of homelessness and provide the necessary support and resources to help individuals transition out of homelessness. Efforts should also focus on fostering collaborative partnerships between government agencies and community organizations. By tackling the root causes and offering adequate support, we can effectively combat homelessness and develop sustainable strategies for managing homeless encampments.

The post The Housing & Homeless Crisis We’re Facing appeared first on The European Business Review.

With the spectre of another recession hovering over Europe, the SME sector must anticipate more disruptions. Recently, voluntary closures of businesses in the Eurozone have spiked. Indeed, it’s hard to start a new business and navigate a high-inflation landscape. It entails entrepreneurs becoming more practical in hedging risks and bouncing back. 

But you can make prudent business decisions in a stormy market environment. You can fortify your business by following these helpful tips. 

Improve Employee Retention 

It takes a lot of effort and patience to improve employee retention. Although it’s easy to find replacements, starting from scratch can waste time and money. The Great Resignation has been disruptive for businesses across the region. And now, it appears to peak as many employees plan to jump ships. Statistics show that 41% of employees will likely leave their jobs from 4Q 2022 to 1Q 2023. 

Even more challenging is the massive labour market transformation. Nearly 70% of employees believe that contracts should be based on results, not work hours. It’s no surprise businesses are switching from nine-to-five to flexible schedules. Doing the bare minimum is also one of the top factors enticing employees to stay. But it may impact productivity, adding more burden to employers. 

Today, Europe still faces difficulties in improving its 14% employee engagement. It lags behind North America, Latin America, the Caribbean, EMEA, and Asia Pacific. So to limit employee turnover, you must heed their needs. 

The most obvious way is through compensation increments. These include transportation, risk, food allowances, and performance bonuses. That way, you can also negotiate your return-to-office (RTO) memo. Encouraging vaccination, providing shuttles, and creating a vibrant work ambiance is also helpful. Doing all these can make them feel secure and valued. 

There are other things you can offer to make them stay. Hearing their opinions, suggestions, concerns, and complaints can go a long way. Non-work-related huddles or dinners can strengthen your bond with them. 

Reassess Your Financial Capacity 

You must ensure your finances can sustain your business amidst economic disruptions. Start by checking your historical performance. The operating revenue and operating costs and expenses are the easiest to spot. They can tell how your business varied with market changes. From there, you can decide to adjust your production level. 

Also, check your Free Cash Flow to focus on actual cash transactions for better accuracy. Compare it to revenues using the FCF/Sales Ratio. It will hint at your capacity to turn revenues into what matters— cash. 

Regarding cash, ask yourself these questions: Will it cover business needs and financial leverage when incurring net losses? What is its percentage relative to the total assets? Compare it to borrowings since interest rate hikes may not slow down anytime soon. You may also need to restructure your borrowings to cope with higher interest rates. 

To be more precise, check cash and borrowings relative to EBITDA using the NET/EBITDA ratio. It will help you measure your earning capacity to cover borrowings. The ratio assesses the consistency between viability and near-term sustainability. 

Measuring financial capacity is also crucial during booms. It helps you determine whether your business is capable of expanding or not. Failure to do so may lead to overleveraging and overcapacity. 

Lastly, it can entice more investment inflows. 

Go Online 

The pandemic has changed the business landscape in no time. Amidst the restricted operations and limited transactions, entrepreneurs had to adapt. One of the best methods to cope with it is by going online. It’s a timely move as digital transformation speeds up. 

With billions of customers and businesses, it’s now easier to transact on the internet. You can apply it to your marketing strategies using social media websites. Going online also helps you expedite business processes, especially your financial reconciliation. You no longer have to worry about manual invoice validation with electronic invoices. Mobile wallets and VCCs allow you to purchase items wherever your supplier is. 

There are various apps to help you optimize efficiency. Workflow and project management apps can help in your cost reduction strategies. 

Maintain Customer and Investor Ties 

Businesses have four stakeholders: owners, investors, employees, and customers. Investor perception and consumer behaviour can influence your goals and directions. A solid customer base means more demand and revenues. Meanwhile, earning the trust of investors means more resources. Therefore, you should get in touch with them as often as possible. 

Listen to them, and make sure they know you’re listening. Their feedback can help you improve the quality of your products and services. Qualitative surveys and product validations often come in handy. But a more comprehensive approach is the Quarterly Business Review (QBR). Discuss the added value of your products and services. Identify effective ways to penetrate the market and improve customer engagement. Enhance investor value by increasing income and payouts. 

Try To Be Different 

Aside from market conditions, the level of competition may affect business success. Your marketing strategies are vital to establishing your positioning and inviting leads. So be more updated on the market changes. 

If you’re a newcomer, it’s better to find your passion and skills and shape them. Having extensive knowledge and experience can help you think of lucrative business ideas. Familiarize yourself with all business aspects. Thankfully, there are a lot of reliable people to guide you with the ins and outs of your chosen industry. You can get the best business ideas for your success by visiting this link. 

Establishing and managing a business during economic downturns can be risky. Higher costs, lower production, and employee turnover are challenges to overcome. Despite this, you can make your business rise above everything else. Your prudence, patience, and effort will eventually pay off. 

The post Shield Your New Business Against Market Disruptions Using These Tips appeared first on The European Business Review.

In just less than a week, the devastating impact of the conflict in Ukraine on the global economy is already being felt. As a major exporter of commodities, particularly food and energy, Russia had one of the largest economies in the world just a fortnight ago (ranked 11th as per IMF data). 

As a result of its widely condemned actions, Russia has been hit with a range of severe sanctions, particularly by western nations, who would rather not face a nuclear opponent on the battlefield. These sanctions have dealt one of the heaviest blows to the Russian economy, causing it to plunge into a deep recession. Some of the sanctions imposed include restricted access to the international payments system SWIFT, the freezing of Russian central bank assets, sanctions against Russian oligarchs and some state-owned banks, and Germany putting a halt to its Russian gas pipeline project.

While the increased prices of gas and oil exports combined with trade conducted with third countries have helped to cushion Russia against the worst of the sanctions, the net economic impact on the Russian economy will be negative. Through our Global Econometric Model (NiGEM), we’ve been able to estimate the following spillover effects to customs brokerage. Due to the war in Ukraine, Russia’s GDP is expected to fall (relative to base) by 1.5 percent in 2022 and 2.6 percent by the end of 2023. Inflation in Russia is expected to spike above 20 percent this year due to higher import prices caused by the rubble’s drop in value and as a result of higher inflation expectations, following weaker real incomes, lower confidence, and in an interruption in trade activities.

In general, we expect the actions taken against Russia to influence a reduction in foreign direct investment, causing an outflow of capital, and decreasing its long-term potential growth rate.

As key players in the global economy, it should go without saying that the economic impact of the Russo-Ukrainian War and the accompanying sanctions will be felt in all parts of the world. According to your analysis, what will be the impact on world GDP and inflation through what channels does this happen?

The war in Ukraine poses a major threat to the global economy, hampering growth and causing a spike in inflation in what is already an existing cost-of-living crisis. While Ukraine isn’t a key trading partner for any of the major economies, Russia is a major export partner for countries such as US, China, Italy, Germany, and France.

There are a number of channels through which the war will affect the global economy. Russia and Ukraine are major exporters of commodities including corn, wheat, palladium, and titanium. Due to the supply chains of these commodities being disrupted, prices are expected to stay high, intensifying for users of such commodities (including smartphone, car, and aircraft makers).

Secondly, with Russia being one of the top three oil producers and energy exporters in the world, the expected drastic increase in energy prices will aggravate the rate of inflation.

Another notable channel through which the world economy will be affected as a result of the war is the strong international economic sanctions on trade with Russia. Keep in mind that these sanctions are far more severe than those placed in Russia in 2014. Our analysis suggests that the price of oil will jump by $40 per barrel.

The massive influx of Ukrainian refugees is another channel through which the world economy will be hampered. According to the UNHCR, we could see up to 4 million refugees as the conflict rages on, and it will be contingent on border controls, how long the conflict continues, and how the economy fairs post-war. Through our analysis, we can predict a net outflow of 2 million a year in 2022 and 2023.

Lastly, increased political risk and uncertainties may ramp up savings ratios and discourage firms from making investments.

Our analysis suggests that the war in Ukraine will cause the level of global GDP to decline by 0.5 percent in 2022, and up to 1 percent by 2023 – translating to about $1 trillion off global GDP. This will lead to a 3 percent increase in global inflation in 2022 and about a 2 percentage points increase in 2023. This would also increase the cost of living and put additional pressure on household consumption.

What and how impactful will the economic effects be on the European Union?

Considering the European Union’s trade links with Russia, reliance on Russian energy for more than 60 percent of its energy requirements, as well as its dependence on Russia for food supplies, the EU is in arguably the most vulnerable position of all major economies.

There has been an increase in risk premia on some European banks and a drop in share prices. Markets will be carefully monitoring any signs of default or liquidity issues for firms with strong ties to Russia.

It is our view that the issue of Ukrainian refugees is primarily a European matter. It brings forth significant demographic challenges, mostly for western Europe and there may be a need for higher public spending to solve these challenges. Additionally, we expect the conflict to drive up NATO’s military spending. The need for additional funds for defense and assistance with the refugee situation is likely to increase pressure on resources and thus inflation.

Through our Global Econometric Model (NiGEM), we are able to predict that Eurozone GDP growth will drop by 0.9 percentage points in 2022 and by 1.5 percentage points in 2023, against our forecast in February. It is also our expectation that inflation will rise to 5.5 percent in 2022 and 2.1 percent in 2023, compared to our February forecasts of 3.1 percent in 2022 and 1.3 percent in 2023.

In the event that sanctions are to be extended to Russian energy exports or Russia starts limiting its gas exports as a means of leverage, energy prices in Europe would skyrocket, thus raising the possibility of a recession as well as much stronger inflation.

Finally, what is to be expected of the UK GDP and inflation?

The UK had a growing trading relationship with Russia. In the wake of the conflict, and as a result of severed financial ties, the UK could see a reduction in GDP growth by around 0.8 percent to 4.0 percent in 2022 and to 0.5 percent in 2023.

Since the UK sources its largest gas supply from Norway and also produces a significant amount of its own gas needs, we expect very few disruptions in supply. However, we do expect the country to be faced with increased wholesale gas prices.

About the Author

Chloe Riley has written on numerous economic matters in the last couple of years. She has a notable interest in geopolitics and cooking

The post Impact of Russia Ukraine Conflict appeared first on The European Business Review.

The reasons for this are simple. Retail units have pretty high energy demands. This is especially true of supermarkets, who need to keep chillers and cooling systems on 24-7, as well as keeping the temperatures warm for staff and customers too. 

So what can supermarkets do to make sure they can continue to provide the services that so many people rely on? 

Well one of the noticeable things would be to increase the prices of the products to cover the shortfall. Now this may not seem problematic, but as consumers’ household budgets are already stretched, it may be the case that raising prices leads to less sales. 

Could Supermarkets Lower Their Profit Margins?

Did you know that supermarket margins are usually around the 2% mark? That means that, after paying for products, premises and people, supermarkets make just 2% profit. With this in mind it is fair to say that there isn’t much room for them to lower prices, so they will need to increase prices for customers to pay. 

The other thing supermarkets can do is reduce the number of deals that are available to shoppers. It may be the case that we start to see less discounted products and buy one get one free offers.

What About The Suppliers?

Of course they will also be dealing with higher energy and transport costs, so will the people who produce the goods that supermarkets sell also need to increase prices? This is quite controversial at the moment so it remains to be seen if prices will need to go up even more in the coming months. However, it is only fair that people who produce the goods receive a fair price that covers the costs of production and leaves a margin for them too.

Could Staff Be The Worst Affected?

Supermarkets employ millions of people in the United Kingdom. There are also many more working in supply chains too. Unfortunately staff costs are often one of the first things large companies look at when facing financial pressure. This isn’t always as brutal as people losing their jobs, but stagnating wages can impact people immensely. As we are all feeling the effects of inflation, staff may suffer most when supermarkets look to address the issues we are discussing.

Invest in the Future

Given that energy bills represent a significant ongoing cost for supermarkets, many bigger stores are looking to future-proof their operations by replacing old infrastructure. Rattly chillers, refrigerators, commercial refrigeration and freezers with doors that don’t close. All of these things cost money to run, so as technological advancements have made this sort of thing much more energy efficient, supermarkets are investing in new commercial refrigeration systems and cooling equipment to save money in the long run.

Conclusions

Increasing energy prices are having a big impact on everyone. Supermarkets are responding in a variety of ways so that they can continue to operate profitably. Doing things like passing on price rises to customers, reducing the number of deals that are available, and even investing in energy efficient chillers and refrigeration systems, supermarkets are making sure that they can cope with the increased running costs associated with higher global energy prices.

The post How Are Supermarkets Dealing With Increasing Energy Prices? appeared first on The European Business Review.

We hope that as we dispel some common misconceptions about closing a business, you’ll feel a bit more at ease if you’re having trouble with your company’s incoming and exiting responsibilities and you’re concerned about the future of your finances.

If my business goes bankrupt I’ll lose my home

The possibility of losing your house in the event that your business shuts down is one of the main worries that owners face. When a business fails, the owner may have to sell their house to pay off the debts. This is actually incorrect. The distinction between business and personal debt is one of the main advantages that limited company owners have in the United Kingdom.

You are protected by limited liability if you own a limited company. This means that the financial affairs of your business and your own are seperate. The only time an individual can be held personally accountable for company debts, are if you have had to sign personal guarantees to obtain finance. Self-employed sole traders do not benefit from limited liability protection and are therefore responsible for their debts.

You could end up going to prison

Not since Victorian times has a company going bankrupt or insolvent meant that you have to go to prison, thankfully we are no longer in the dark ages. 

In Britain, declaring bankruptcy or being insolvent is not grounds for imprisonment unless fraud has been committed. Businesses fail all the time, so trying to make one succeed and it not working doesn’t make you a criminal. In the event that you intentionally defraud creditors or consumers while operating a failing business, you risk being charged with fraud and then potentially a prison sentence.

If you’re the business is going bust, you have to close it

Although being bankrupt is never a good thing, it doesn’t always have to spell the end of a business

You are technically considered to be insolvent if you are unable to pay your debts as they become due. However, not being able to pay your liabilities could be down to a number of reasons and doesn’t mean that the business is failing. You could be waiting for a critical payment at just the right time. It is important to consider how you’ve found yourself in that position though, is the business model sustainable in its current vicinity?

If one business goes bankrupt, you can’t open another one

There would only be a few companies left in the world if you could only own one.

Even though having a failed business may not always seem good on a resume, unless you have engaged in fraud or failed to fulfil your obligations as a company director, nothing prevents you from shutting down one business and launching a new one the next day. You might be able to individually purchase your company’s assets and utilise them to launch a new company in the same industry, depending on your financial situation.

It’s possible to close the company yourself

You can’t close a limited company yourself. This must be carried out by a licensed insolvency practitioner. 

You can apply for a dissolution if your business has very few assets, no work due in, no way to pay for a liquidator. It’s crucial to speak with an insolvency practitioner first to determine whether this is a practical alternative. If you’re unable to have the company dissolved, you’ll need to go through a form liquidation process, which can only be carried out by a licenced insolvency practitioner.

In summary

Closing your business can be a difficult and stressful process, but due to rumours about prison and house sales, it may seem like an even worse prospect. However, a company going out of business need not result in you losing your house, being personally insolvent, or preventing you from starting a new business.

The post Closing Your Business – The Myths Debunked appeared first on The European Business Review.

Geopolitical shifts born out of the US-China-Russia rivalry have manifested in supply chain interruptions, divestments, national security directed decoupling, hyperinflation, and reorganisation of energy and trade relations. International corporations now have to deal with an added layer of uncertainty created by these dynamic disruptions.

Macroeconomic conflict and geopolitical volatility were among the top five threats to growth anticipated by CEOs, according to the latest PWC survey, published in January 2022. After Russia’s invasion of Ukraine in February of this year, geopolitical volatility and macroeconomic conflict have the potential of leading the threat to growth as reflected in the latest McKinsey’s Economic Competition Outlook. For US international corporations, emerging geopolitical trends are affecting the operational environment in host countries around the globe in five major ways.

Shifting alliances.

New and shifting regional economic blocs and security alliances are complicating market entry. As an example, firms in the US looking to enter the Chinese market may experience political and regulatory challenges that can increase the cost of doing business. The same can be said about Chinese firms looking to enter the US market. Similarly, countries with increasingly close relationships with either the US or China can reap economic rewards as a result of their alliance. Driven by China, one of the leading examples is the Regional Comprehensive Economic Partnership (RCEP). RCEP is the world’s largest trading bloc, overtaking NAFTA and EU-28 and encompassing 30 per cent of global GDP.

Political interference and legal challenges.

Government policies and the legal and regulatory environment have a direct impact on business operations and trade relations. Economic sanctions on Russia by the US as well as European governments derailed the business development plans of some companies and had an adverse effect on the profitability of many companies around the world. Numerous challenges relating to international legal, tax, and governance issues have emerged from these evolving government interactions.

Company and product perception.

The marketability of products and services exported from countries of different geopolitical leanings diminishes, due to negative perceptions and biases. In certain cases, some of the companies that used to buy oil products from Russia had started to look for alternative sources to please their governments and customers.

Operational clout and influence.

US international clout and hegemony have been reduced in some parts of the world. This reduction in influence can decrease transaction volume in important industries such as construction, government contracting, defence equipment sales, and real estate and infrastructure projects, among others. The 2021 National Trade Estimate Report on Foreign Trade Barriers published by the Office of the United States Trade Representative points to the numerous types of non-tariff barriers facing US products and services.

Business rivalry.

Rivalry intertwined with political and economic agendas is dictated by domestic politics and elites. A heightened level of competition across countries can result in higher tariffs and complex administrative policies that would have an adverse effect on business.

An important question in the minds of multinational executives is this: “How can I manage these geopolitical challenges amidst an increasingly uncertain global environment?”

Finding answers requires an unprecedented level of operational flexibility and a paradigm shift.

Local Is King Again

Geopolitical trends put breaks on globalisation, measured by trade and capital flows. One could argue that geopolitical trends have reversed globalisation gains in the past five years, due in part to COVID-19. Far from predicting the collapse of globalisation, however, and as international flows are regaining their pre-pandemic growth rate, current assessments anticipate a change in the geography of international flows as regional economic blocs are taking shape on either side of the US-China competition fault line.

Due to these geopolitical developments, emerging and developing markets have gained bargaining leverage, which translates to greater autonomy regarding trade and FDI flows. The Local represented by domestic politics, geopolitical leanings, governance, regulatory, and socio-economic trends is increasingly the deciding factor guiding opportunities and creating barriers for international businesses.

The Metis Advantage

Intelligence, or metis as it was called in ancient Greece, was seen as superior to physical power or bie. Metis as strategic intelligence is forward-looking, with elements of anticipation, planning, and resourcefulness. Metis is valued when circumstances are fluid, uncertain, and fast-moving, as it creates sufficient pliability and ability to adapt to changing circumstances.

Political risks, which include geopolitical risks, are a lived reality that directly affects business operations and shapes the future operational environment. Intelligence about prospective markets beyond due diligence and economic feasibility studies is a crucial component of understanding the operational environment. Macro- and micro/sector-specific intelligence create the capacity to think ahead, attend to details, and proactively have resources and controls in place to face possible risks and take advantage of opportunities in the host country. Metis for today’s international corporation must meet a higher standard with the following core components:

1. Heightened context intelligence piercing through language and cultural barriers.

In the Middle East and North Africa (MENA) region for example, intercultural competence and cross-cultural business communication enables international corporations to establish realistic understanding of the opportunities and the cost of doing business, and establish crucial relations in a host country, a capability most useful for verifying official statistics and gaining equal footing during negotiations. In addition, understanding drivers of rapid growth of local industries, such as ACWA Power’s transformation from a Saudi energy and desalination company in 2004 to a global energy and water company spanning three continents by 2011, can provide perspectives that are helpful in joint venture collaborations and market entry initiatives in international locations.

2. Ability to combine data with complex systems analysis.

Data analysis of country statistics has to be integrated with the wider network of interrelated dynamic factors that shape the region. In MENA, for example, understanding the host country risk profile is not enough. Cross-national factors such as political instability, food insecurity, supply chain disruptions, energy connectivity, shifting alliances, capital flows, and expanding Chinese and Russian commercial presence are crucial in understanding the moving parts that are shaping the future of the host country.

3. Assessment of plausible future scenarios for medium- and long-term planning.

Foresight and anticipating possible future outcomes stem directly from context intelligence, which enables meaningful interpretation of developing socio-economic, political, and geopolitical trends and warning signs. Past data is not a reliable indicator of future situations in volatile environments; hence the importance of monitoring warning signs and developing trends through Open Source Intelligence and Human Intelligence. As volatility and uncertainty increase in an operating environment, so does the need for scenario planning, as it challenges the conventional and linear mindset and prepares executive decision makers for a broader range of potential high-impact events.

4. Ability to provide proactive and adaptive strategies for stakeholders.

Far from forecasting the future, scenario planning provides the necessary elements for strategic intelligence by anticipating what is possible, mainly in the domain of risks and opportunities and its implications to those potentially impacted by unfolding changes. The British Shell Oil Company’s scenario planning famously enabled it to mitigate the 1973 oil crisis that engulfed the global energy market. Its actions led to multiple benefits to customers, employees, investors, suppliers, communities, and even governments. With the current developing geopolitical disruptions, having proactive and adaptive strategies creates corporate resilience in times of uncertainty and can favourably impact stakeholder relationships.

Beyond Intelligence

Traditional corporate intelligence and enterprise risk management is no longer sufficient to meet the standard of metis that is essential in order to compete in today’s competitive and uncertain environment. Companies need to step up their game and elevate their corporate capabilities to include strategic intelligence, context intelligence, and efficient foresight to compete and sustain their operations. There is a need to elevate the practice of context intelligence and weave it into corporate strategy.

With strategic intelligence, companies can transform uncertainties into known risks, thereby gaining the ability to think ahead and plan for possible disruptions as well as opportunities. Horizon scanning, monitoring warning signs, and bespoke scenario planning is a competitive advantage that keeps a company ahead in planning and preparation.

Conclusion

Geopolitical changes around the world, such as the US-China-Russia rivalry, Brexit, BRICS possible expansion, monopoly over rare earth minerals, and many other sociopolitical and economic realignments, are on the upward trajectory and have a growing influence on the corporate world. Executives ignoring political and geopolitical risks in their international business activities face elevated business risks and operational blunders. Those with elevated metis are poised to find unique pockets of opportunities that others missed. Within this playing field, thinking through several steps ahead – much as a chess grandmaster anticipates competitive moves and shifting scenarios – becomes a quintessential corporate competency.

About the Authors

Ghaidaa Hetou is the founder of I-Strategic LLC, a political risk advisory firm providing risk intelligence to corporations in the Middle East and North Africa region. She is also a published author and lecturer at Rutgers University.

J. Mark Munoz is a Professor of Management at Millikin University, former Harvard Visiting Fellow and editor of the books Handbook on the Geopolitics of Business, Advances in Geoeconomics, and Global Business Intelligence.

References

• Altman, S.A. and Bastian, C.R. (2022). “The state of globalization in 2022”. Harvard Business Review. Accessed 2 May 2022. Available at: https://hbr.org/2022/04/the-state-of-globalization-in-2022
• Cali, M. (2020). “The significance of the Regional Economic Partnership Agreement”. Accessed 14 June 2022. Available at: https://www.brookings.edu/blog/future-development/2020/11/20/the-significance-of-the-regional-economic-partnership-agreement/
• McKinsey.com (2022). “Economic conditions outlook”, March 2022. Accessed 2 May 2022. Available at: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/economic-conditions-outlook-2022
• PWC.com (2022). “Reimagining the outcomes that matter”. Accessed 2 May 2022. Available at: https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2022.html
• USTR (2021). “National trade estimate report on foreign trade barriers”. Accessed 14 June 2022. Available at: https://ustr.gov/sites/default/files/files/reports/2021/2021NTE.pdf

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Regardless of how the crisis comes about, the consequences could be devastating for your business or jeopardize your future. To prevent these types of situations and to manage a crisis effectively, it is important to react as fast as you can and to take the necessary measures to extract your company from turmoil. There are no miracle solutions when it comes to how to deal with a crisis, but there are a few steps you can take to come up with a practical crisis-management plan.

1. Identify Any Risks

Effective crisis management begins with anticipating risks that your company might face. Gather representatives from each department for brainstorming sessions to come up with a comprehensive list of potential risks. This could range from computer crashes to natural disasters, including defective products, work accidents, or cyber-attacks.

The next step involves analyzing each risk to decide on the likelihood of it occurring and how it would impact your organization. Then assign each risk with a ranking. With this type of in-depth analysis, it becomes easier to work out which of the risks you can avoid by changing your current practices and changing up work processes. For example, you might be able to lower the risks associated with a cyber attack by purchasing effective antivirus software or providing regular training sessions on cyber-related security to your IT employees.

2. Define Your Action Plan

Once you have successfully identified all the potential risks, it becomes necessary to define the material and human resources that need to be put into place to effectively respond to each type of crisis situation. Crisis management plans take into account every possible scenario and will also include operational responses. This could include BCP (Business Continuity Planning), evacuation plans, Business Recovery Plans, and more.

It is vital to prepare well and to have response plans in place before the crisis can occur. Why? Since it is very likely that you would react differently (less efficiently) when your business is thrown into a “real crisis situation”.

It is also important to update and revise your crisis plan regularly since risks are also likely to change. You should also test it out to ensure that it is effective.

3. Set Up A Crisis Unit

The primary space for your crisis management plan involves an effective crisis unit. This is a space where the organization for crisis management is centralized, a strategy for mass notification system is implemented and response plans are effectively piloted.

Your crisis unit should include employees from your company and external experts that have experience in specific events relating to critical or sensitive situations:

• Primary decision-makers of your company (senior managers, service managers, and managers)
• External or internal experts with experience relating to the nature of specific types of crisis
• Public relations and communication specialists
• Insurers, lawyers, or legal advisors

It is in this crisis unit that decisions will be made on how to deal with crisis events and ways to protect the organization, its reputation, and its business.

4. Nominate And Train A Spokesperson

When faced with a crisis, it’s important to coordinate all corporate communications carefully to preserve the reputation and image of the company.

There are two primary communication types when facing a crisis:

• Communication that is aimed at managing the crisis or lowering the impact that it has on day-to-day business operations (by alerting the public and/or customers, coordinating operations, and sending instructions to the staff members).
• Communication that is focused on preventing scandals or rumors and safeguarding the reputation and image of the business.

You should nominate one of your staff members to become an official spokesperson should your company ever face a crisis situation. They (if you have chosen more than one) will be the only party that is authorized to speak or send out notifications on behalf of the company. They should be viewed as the official source for any information on the actions and position of the company.

The spokesperson should be selected with care and trained on how to communicate through the different communication channels.

5. Define The Transmitted Messages

During times of crisis, your business will need to address different audiences such as the public, suppliers, partners, clients, employees, etc. The messages will probably vary according to an intended target, and also the media that is chosen to disseminate this information (for example the press, social media, the website of the business, etc.) It is important that your core message is kept clear, simple, and easy to understand by everyone. Avoid denying that there is a problem and try to be transparent about the situation.

The first message is usually in the form of an alert message. From here you will need to explain how the situation is evolving. To stop the messages from being impacted by pressure and stress during the critical situation, make sure you develop these messages by keeping a very close watch on the disaster scenario you identified in the initial step.

6. Provide Enough Space For Crisis Management

If a crisis ever does occur, you need to respond by implementing the actions you have already prepared for beforehand. Have you detected any abnormal situations or problems? Assess the threat level, and according to this launch your crisis unit. From here send out your alerts, and get to work immediately on your response plan.

7. Remain Positive

Crisis situations really test the strength of a company. However, when managed well, it does have the potential to create innovative opportunities in the way of forcing the business to come up with creative and innovative ways to move forward and bounce back. Internally, crisis situations can pave the way to strengthen a sense of belonging for your employees and fortify team cohesion. Externally, it could result in an occasion that displays the reactivity, resilience, and strength of your company.

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Global organisations must rethink supply chain management to cope with the aggravated supply chain challenges resulting from all sorts of disruptions, such as geopolitical instability, pandemic, and trade disputes. No organisation is exempt. In this article, I present my views on the need for organisations to adequately prepare for disruptions before they occur.

Even since the trade war between the US and China broke out in 2019, few would have expected our globe to become so restless, even up to the present, amid a sequence of major crises such as COVID-19 and the Russia-Ukraine war. Gartner is a UK-based research and advisory institute. It interviewed almost a thousand professionals in supply chain management after the trade war began. The survey¹ revealed that foreign entities were fleeing from China, while countries in South East Asia and South America were clearly benefiting from the outflow of job opportunities. The recent “dynamic clearing” mandate by the central government of China in response to COVID-19 has only made this wave of job migration even worse.

One of the most visible consequences of the disruptions is the shortage of supplies. For instance, the US has pioneered the development of a range of medical equipment and supplies. Yet it took the pandemic to alert US nationals to the fact that most of the necessities for surviving the pandemic, such as masks, testing kits, and ventilators, are manufactured offshore. In retrospect, ex-president Donald Trump was correct to give preference to domestic manufacturing before the outbreak of COVID-19, only to include items such as masks and nasal swabs in his list!

A survey released by Gartner in 2020² also reflected the fact that the pandemic and the shortage of critical supplies were the top two supply chain risks, ahead of cybersecurity and trade war. Therefore, it is imperative that global organisations give thought to how to move forward with their supply chains.

Configuring the Supply Chain

Whether it’s the trade war or the COVID-19 pandemic, the scope and time span of the crises are unprecedented. Unless a company has prepared proactively before a major disruption occurs, it will surely find the going tough. Certainly, even if a company had fulfilled all its due diligence in planning for contingencies in the event of a major disruption, no one would have predicted a pandemic of such a scale and time duration as COVID-19. However, in this regard, a handful of companies have demonstrated much more flexibility and agility in dealing with unforeseeable disruptions. As a result, their supply chains function more smoothly and seamlessly, allowing them to offer a better service than their rivals.

In order to diversify or mitigate risk, whether market- or supply-oriented, a company should design and configure its supply chain with some built-in hedging capabilities. One realisation is the need to own and operate a fast and responsive supply chain, while at the same time having another, cost-conscious supply chain relying more on sea freight and shipment consolidation. This dual-supply-chains approach not only allows the company to optimise based on cost and performance; geographically, having plants and distribution centres located across continents is a way to hedge against geopolitical and pandemic risk. Regional supply chains are more expensive to set up and to run, but a more decentralised configuration of supply chains also enables the company to have multiple sources of supply, should a disruption occur.

More than a decade ago, HP already practised and advocated using portfolios of supply chains. Portfolios may include low-cost, lean supply chains, as well as agile and responsive supply chains at the other end of the spectrum. As described by Olavson et al.³, “Portfolios also allow supply chains to adapt over both the long term and short term, with or without changing supply chain designs. In the short term, portfolios allow companies to re-optimise tactics to shift the mix between supply chains to adjust to macroeconomic volatility and new competitive threats to both price and responsiveness.”

A garment manufacturer that I am acquainted with became a victim of the Sino-US tension. It was blacklisted by the US Department of Commerce, and shipments were consequently detained by US Customs. In responding to the crisis, it quickly redirected market focus from the US to Asia, but that also implied redesigning new products and reconfiguring, scaling down, and even closing some of its garment factories in countries such as Malaysia and Mauritius. The sooner the company was able to enact, the smaller the loss that was incurred.

Omni-channel Capabilities

In a survey conducted by Gartner, advanced robotics and robotic process automation were ranked numbers 5 and 6, respectively, among the top disruptive and important digital technologies of today. Although they ranked immediately behind artificial intelligence, big data analytics, machine learning, and the internet of things, advanced robotics and robotic process automation proved to be smart investments. It is well known that e-commerce titans like Amazon and Alibaba invested heavily in warehouse and distribution automation, such as in picking and packing orders. During the pandemic, prolonged lockdown periods due to tightened social distancing policies led to exceedingly high levels of absenteeism. Shortage of labour can be seen everywhere. A global logistics company revealed to me that its absenteeism rate in Hong Kong reached 50 per cent at its peak. I anticipate more investment in robotics and process automation as a future trend, not just in the short term but also the long term, driven by the pandemic.

On the other hand, the past years have seen more companies emphasising the importance of omni-channels. Having both online and offline channels in place, as in the case O2O, allows a company to effectively hedge against any disruption that might cripple one of the two channels. It is evident that e-commerce companies running an end-to-end channel from retailing to delivery are the winners in this wave of pandemic. Many customers switched to placing orders online at home and having these orders delivered right to their doors. Traditional bricks-and-mortar retailers who do not have an online channel clearly lack the flexibility to take in orders, especially during the peaks of the pandemic, when most customers refrain from leaving home to go shopping.

Big Data Analytics

As importantly as putting the physical supply chain in place, information, or more specifically market intelligence, is the next focus for a company in order to cope effectively with changes due to unanticipated disruptions. The technique of big data analytics facilitates quickly detecting any market abnormalities, so that a company can take action to rectify the situation. A seamlessly managed supply chain does not come into existence by chance. Today, most companies and their supply chains manage a large number of stock keeping units. The behaviour of a SKU is dynamic, given that the pandemic has triggered significant changes in the buying behaviour of customers. For instance, Walmart, the largest retailer in the world, processes more than one million retail transactions per hour. To process and interpret the data so that is quickly converted to market intelligence is a formidable task. Even with the best physical supply chain in place, all actions to be taken with regard to the supply chain are initiated after the data becomes intelligence, and intelligence triggers decisions, something that cannot be achieved without sound data analytics capabilities in today’s digital society.

Conclusion

We have experienced some of the most challenging times of market disruption in decades. Risk exists in different realms, such as geopolitical tension, climate change, and pandemic, and they all end up making supply chain management erratic and formidable. Certainly, there is no quick fix here, but a company that is always thinking ahead before a crisis occurs is more prepared to build proactive mechanisms into its supply chains. The rewards can be tremendous.

About the Author

Ki Ling Cheung is an Associate Professor in the Department of Information Systems, Business Statistics and Operations Management, at the Hong Kong University of Science and Technology. He received a BS degree in Mathematics from University of Wisconsin, Madison, and an MS degree and a PhD degree in Industrial Engineering, both from Stanford University. Prior to joining HKUST, he was a management consultant at Teknekron Corporation, USA. His primary research interest is in inventory management and supply chain management.

References

• Gartner (2018). Future of Supply Chain: Reshaping the Profession.
• Gartner (2020). Weathering the Supply Chain Storm Survey.
• Thomas Olavson, Hau Lee and Gavin DeNyse “A Portfolio Approach to Supply Chain Design,” Supply Chain Management Review, July/August 2010, P. 20-27.

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Online shopping has grown dramatically in popularity and scope over the last decade, with the events of 2020 forcing ever-greater numbers of consumers online and changing the retail habits of shoppers forever. Unfortunately, along with a rise in eCommerce, there has been a surge in the number of online scams being reported. 

In the UK, consumer magazine Which found that online fraud soared between April 2020 and March 2021, with over 400,000 reports made to the UK’s cybercrime reporting centre — a 33% rise from the previous year. Meanwhile, in the Netherlands, nearly 2.5 million people were successfully targeted by scammers in 2021.  

The figures from these two sample countries are undoubtedly problematic. Still, they represent a drop in the ocean of the total volume of online fraud happening worldwide, which according to estimates, has reached 20 billion US dollars globally. 

So how can merchants protect their customers from online fraud while ensuring they don’t fall prey to scammers? Let’s look at cybercriminals’ most common fraud techniques and how to prevent them from happening. 

Identity theft 

Identity theft is as old as the internet itself. This type of fraud takes many forms, but from an eCommerce perspective, the practice usually involves a criminal either opening a credit card in a person’s name without their knowledge or stealing the details of an existing card and using it to make online purchases. 

How to Avoid It 

For consumers, identity theft is often instigated using phishing scams. Fraudsters will go to great lengths to misdirect shoppers to convincing fake versions of official checkout pages, where victims will mistakenly enter their card details and subsequently have them stolen. 

Merchants can help combat this type of fraud by reminding customers to check for trust seals and suspicious URLs and using modern payment methods with more sophisticated authentication in place. For example, 3D Secure (3DS) requires shoppers to take an additional verification step at checkout to prove they are the rightful owner of the payment method they use — typically a password associated with the account or a code sent via text to their phone. 

Another way to make checkouts more secure is to use an Open Banking solution to accept payments, which authenticates payments via the user’s banking app. Open Banking payments require less friction during the authentication process, as they are often approved using fingerprint or Face-ID sensors, making it possible to add security without ruining conversion. 

Payment Interception 

Payment interception is more commonly known as “man in the middle fraud”. Payment interception can take many forms, including impersonating a company representative and sending customers to fake payment pages, or more sophisticated forms of hacking that literally intercept cardholder data as it’s transmitted during the checkout process. 

How to Avoid It 

Payment data interception is covered by a standard known as PCI DSS, which stands for Payment Card Industry Data Security Standard. PCI DSS is a set of requirements merchants need to meet to prove they are storing and securing customer payment data safely. 

The standards cover the processing and transmission stage of the checkout process, and call for all data to be encrypted during transit. The easiest way for merchants to meet the standards is to pair with a reputable payment provider that will host their checkout pages securely and deal with the technical aspects of the regulations. 

Refund Frauds 

Refund fraud is also known as a ‘chargeback’ or even ‘friendly fraud’. This type of scam involves purchasing goods or services online, claiming that they were unaware of the purchase having been made, and subsequently starting a false dispute process to claim back the money (while keeping the goods or using the service they have purchased). 

This type of scam is a major concern for card issuers and merchants, as it’s widespread, with merchants having to absorb the costs of losing the goods that have had their sales refunded. 

How to Avoid It 

Transparent refund policies and accurate product and shipping descriptions can all help to mitigate genuine chargebacks. However, merchants could again consider implementing Open Banking at checkout to combat scammers. 

As previously mentioned, Open Banking uses account-to-account transfers to pay for goods and services. Not only are transactions fast and secure, but they also don’t involve card network intermediaries. Hence, no chargeback process is available — though legitimate customers still enjoy the usual consumer rights and protection. 

A Final Word on Anti-Fraud Systems 

Eliminating fraud shouldn’t purely rely on strengthening security at checkout. The best payment gateways and their platforms feature sophisticated fraud mitigation systems that aim to assess risk and repel the bulk of attacks from scammers without merchants or legitimate shoppers ever being aware of their operation. 

AI and machine learning are employed to analyse transaction data in real-time, allowing fraud systems to spot patterns and identify scammers. Fraud filters can be configured individually for each merchant depending on their industry or geographical location, with transactions scored and flagged if they look suspicious. When implemented correctly, risk control and anti-fraud systems shouldn’t impact checkout conversion at all. 

Digital Payment is the Future 

Despite all the accounts of fraud, phishing, and chargebacks, eCommerce and digital payments are undoubtedly the future of retail. Fraudsters will always be present, whether in the online or offline world, so abandoning virtual transactions isn’t a viable solution.  

The most effective tool to combat fraudsters in 2022 and beyond is to educate yourself about common attack methods. In addition, choose a reputable payment provider that offers the latest payment methods, such as Open Banking, whilst complying with the protocols set by the Payment Card Industry Data Security Standard. 

About the Author 

Pavels Smirnovs is the Head of ECOMMPAY‘s Fraud Risk Division. As an expert in payment solutions and technologies, Pavels is in charge of detecting, investigating, and preventing different acts of consumer fraud. His passion is security, IT, and data. 

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