Building Enterprise-wide Resilience in an Age of Permacrisis

Are we in an age of “permacrisis” that is characterized by extended instability, insecurity, and lurching from one pressing challenge to the next? Or does this overdramatize the events of today, downplaying the experiences of earlier generations?

Even if permacrisis is too extreme a label, organizations still need to ensure that they are ready to navigate a lengthy period of turbulence and uncertainty in what is being touted as a low-growth, low-cooperation era.

The Global Risks Report 2023, prepared by the World Economic Forum in collaboration with Marsh McLennan and Zurich Insurance Group, reflects on the compounding effects of Russia’s invasion of Ukraine and the complex global recovery from the COVID-19 pandemic. These seismic events have triggered or exacerbated a cascade of near-term crises and set the frame for escalating risks that may harden into new structural realities over the next decade. Board members will need to challenge executive assumptions about what the coming years might offer and bring wisdom to the finessing of unavoidable trade-offs.

Recent headlines about the economy—whether there will be a recession, how deep it might be, and how long it might last—may be front of mind, with the International Monetary Fund, among others, softening the downbeat view of the global economy it was promoting at the end of last year, boosting the confidence of financial markets. But that is too singular and linear a narrative to frame the risk landscape, and organizations would do well to explore their exposures to two different kinds of risk as they assess how they are positioned for the future.

Examine the perils within domestic national fragilities and international economic relations. A protracted cost-of-living crisis could take social unrest and political instability to new levels. In Europe, vulnerable households are choosing between food and heating this winter; in low-income countries significant parts of the population have been plunged back into poverty, wiping out gains from the last decade. Soaring government debt in many countries is constraining welfare payments, health system reform, and investment in future infrastructure resilience. 

Societal polarization continues to be exacerbated by social media algorithms and active misinformation campaigns; trust in government competence and probity has sunk yet further.  National politics is highly divisive, with each new regime in democratic countries determined to undo the legacy of the last government as quicky as possible and tired illiberal regimes seeking new tools to hang on to power.  

Government postures oscillate between populist policies and unaffordable largesse on one hand and heightened surveillance, crackdowns, emergency laws, and support from foreign powers on the other. The likelihood of political violence and state collapse in weaker economies has risen.

Economic and industrial policy levers are being freely deployed in pursuit of economic protectionism and national security, and to constrain the development of rival states. As an instrument of offense, this is most visible in the sanctions imposed on Russian energy businesses, financial system players, and leadership; as a means of defense, it is also apparent in increased foreign investment screening, constraints on technology sharing, and deeper strategic economic alliances with pivotal partner countries.

Strengthened industrial policies that have both national security and economic protectionist foundations are spurring a new “arms race.” While incentives to onshore business activities are attractive, they may also inflate the cost of business, reduce the scope for supply chain diversification, and generate new risks from local dependencies. Moreover, rather than lowering the risk of foreign exposures, a protection-based system may make firms vulnerable to countermeasures in other markets.

Further into the future looms the prospect of more intense rivalry for natural resources, such as food and minerals. The extent of climate change and the level of commitment to net-zero imperatives, along with the degree of conflict in the geopolitical environment, will inform the likelihood of commodity price spikes, multi-resource crises, divergent levels of distress globally, heightened resource nationalism, and increasingly aggressive strategic contestation.

Encourage resilience as an enterprise-wide imperative. Crises of recent years have stretched definitions, imperatives, and opportunities for resilience. Directors should ensure that innovations and momentum acquired through the pandemic are not lost and that the discipline of resilience extends beyond assets and operations to embrace enterprise-wide behaviors. At the height of the pandemic, agility had its time in the sun, but being agile won’t always get you out of a supply chain crunch. 

Safety, security, and continuity questions for business operations remain ever important, but most corporate strategies would benefit from being subjected to tougher resilience assessments, noting that the current multifaceted turmoil may take the world in different directions. A look at corporate share price drops over the last year reveals plenty of firms that were hit by changing events, but also those that wildly misjudged what the future would hold.

The nature of the macro-level risks landscape and perils identified above argue for a continual re-evaluation of non-market forces, by which it is easy to be blindsided. In countries that are critical for raw materials, manufacturing, or sales, these might take the form of tougher regulations and standards (especially on climate transition and data privacy matters); ownership requirements; social license to operate expectations; technology transfer and personnel mobility constraints; and windfall taxes.

Many organizations have risk dashboards that provide a snapshot of individual exposures and concerns, and the likely effects of mitigation plans. But this does not necessarily provide a good view of responsive capabilities for complex multipart crises that demand a variety of levers to be deployed in combination. Board members may find it helpful to understand their organization’s maturity and progress toward greater resilience against the backdrop of a changing risk environment. 

Whether we’re in an age of permacrisis or not, we live in volatile times. The opportunities are tremendous, but there is no room for complacency.