In an increasingly networked world, organizations need to move beyond the kind of corporate disaster-recovery efforts that followed the earthquake, tsunami and nuclear incidents in Japan in 2011. To be in the top-performing tier, organizations need to become resilient to internal as well as external disruptions. Process resilience, in particular, is very important for industries which are either highly regulated, Internet facing, or serve end-user customers. Below, Morris Cohen and Praveen Pathak, professors of operations and information management at Wharton and the University of Florida, respectively, and Alexis Samuel, chief risk officer and head of business process transformation at Wipro, look at why process resilience is becoming a business imperative. This white paper was produced by Knowledge@ Wharton and sponsored by Wipro Technologies.
Disaster recovery is typically reactive. If something goes down, can it be recovered? But organizations need to be proactive about potential disasters, especially when it comes to the resilience of their business processes, says Alexis Samuel, chief risk officer and head of business process transformation at Wipro Technologies. It is an emerging concept, but Samuel expects process resilience to become a “business imperative” in the coming years.
It is about “the resilience of processes and the underlying IT systems, people practices and technologies that together make an enterprise function consistently,” according to Samuel, who is also global managing partner for Wipro Consulting Services. It is also “the ability of an organization to maintain the continuity of its business and meet obligations.”
Taking a broader perspective, Morris Cohen, a Wharton professor of operations and information management, notes, “If you respond quickly to any disruption in an efficient manner, one would say you are resilient.” But remaining resilient is more difficult now because of increasing globalization, interconnectivity and “the way in which we manage supply chains and economies today.” He cites the March 2011 earthquake, tsunami and nuclear incidents at the Fukushima reactors in Japan. Following this triple disaster, the auto industry across the world was disrupted for many weeks. Part of the reason was that certain Tier 3 or Tier 4 suppliers based in the worst-affected Tohuku region had to shut down, and it had a ripple effect. “Companies like Nissan and Toyota didn’t even know about the existence of these suppliers. One
of the lessons learned was that companies need to go all the way down and figure out all the connections in the network, because it can breakdown somewhere and bring the whole system down.”
While every industry is susceptible to risks, the consequences of disruptions vary, Cohen points out. Most vulnerable are defense, banking, financial services and insurance (BFSI) and health care. Samuel, looking at the issue from another angle, suggests that process resilience is most relevant for industries which are either highly regulated, Internet-based, or are enduser service providers, like BFSI and retail.
Both Cohen and Samuel note that process resilience is more relevant for larger players because they are more complex and also part of a larger ecosystem and therefore can be a source of ripple effect. “There are more interconnected parts in large companies, and it is harder to respond fast and effectively if you are big and complicated,” Cohen says. “Therefore, robust processes, whether related to supply chain, IT or anything else, are very important.” Large organizations are also likely to be under greater scrutiny from regulators because of their public impact.