Resilience describes an ability to rebound from devastating shocks. With Covid-19 predicted to cause the most turbulent economic and political shock of the last century – already triggering major disruptions to resource projects around the world – finding an ability to rebound and thrive after this crisis is more critical than ever. In this note, we offer some initial guidelines for resource companies to assist with building resilience into corporate strategy.
By Sipke Shaughnessy PhD, Analyst
Over the last ten years or so, the concept of ‘resilience’ became something of a buzzword in business literature and thought leadership. The lens of resilience and the sensibility of fostering resilient behaviours could seemingly be applied to everything, from leadership and employee mental health to corporate governance and strategy. The unprecedented global shock brought about by the Covid-19 crisis appears an opportune moment to revisit the fundamental components of corporate resilience and how these might be translated into concrete actions by resource companies seeking to protect their core business and seize emerging opportunities. This note represents some of our initial thoughts on the issue.
As an analytical framework, ‘resilience’ first emerged in the field of ecology. Canadian ecologist Crawford Holling first framed resilience, fundamentally, as an ability to rebound from, rather than to withstand, devastating shocks. From here, the framework proliferated, permeating the fields of psychology and organisational studies, from which it entered the business lexicon through discussions around how leaders and business could cultivate their resilience to seismic shocks out of their control.
It is the ecological roots of resilience that make it apt for thinking about how resource companies might rebound from a shock as tumultuous as that of the Covid-19 crisis. Natural resource projects, similar to ecosystems, only function effectively when a key set of political, economic, social and legal conditions are met in the project’s business environment. The Covid-19 crisis has sent business environments into total disarray, brought global consumption patterns to a halt, forced governments to install unprecedented stimulus packages, sent oil prices into a rapid downward spiral and led to the shuttering of hundreds of mining projects around the world. As we outlined in a recent presentation, the world Covid-19 leaves behind will not be the same as the one it entered.
This is precisely what resilience theorists classify as a shock, the first of this degree of severity that we have experienced since the previous century. Understanding how to generate resilience could therefore aid resource companies not only to rebound, but also to thrive as we emerge from the crisis. As an initial step, we have tailored some of the key principles outlined by resilience theory to make them relevant to resource companies faced with dramatic transformations in their business environment.
Placing core values at the centre of shock response
Responding to shock necessarily involves being adaptable (or agile) in order to seize new opportunities, mitigate threats and maintain core business. However, this should not come at the expense of an organisation losing its identity vis-à-vis its network of partners, shareholders, employees, consumers and competitors. Maintaining and communicating a commitment to positive core values ensures that stakeholders can continue to engage with a company in ways with which they are familiar. It also assures stakeholders that a company will maintain certain principles upon which they can continue to depend in an otherwise rapidly changing world. This facilitates the level of trust needed to build and maintain critical relationships. These core values can include prior commitment to certain standards on ESG. However, while maintaining an internal commitment to these values is primary, ensuring an effective communications strategy that conveys this commitment to stakeholders is equally crucial.
Taking a leadership role in tackling the crisis
For resource companies, demonstrating leadership in tackling and managing the crisis to key stakeholders is crucial for their future license to operate. Generating goodwill among stakeholders will yield dividends as the resource sector enters ‘the new normal’. As the business environment changes, the ability to draw on as wide a range of positive, symbiotic relationships as possible is fundamental to a robust resilience strategy – helping to buffer companies against unknown threats and to seize unforeseen opportunities down the line.
Several resource companies have already taken steps to position themselves as leading players in the Covid-19 response in their jurisdictions. AngloGold Ashanti, for example, have been working closely with regional governments in South Africa to make their hospitals exclusively available for the treatment of Covid-19 patients, as well as donating masks, water tanks and care packages.
Critical Resource have been tracking initiatives by resource companies that support government Covid-19 responses, bolster supply chain partners and aid communities in reducing the spread and mortality rate of the virus. We outlined some initial thinking on emerging international best practice in this article in April.
Prioritising the rebound
As outlined above, the defining characteristic of resilience is an ability to rebound from shocks, rather than avoiding them or simply withstanding them. Focusing on the preservation of business-as-usual makes it more likely that organisations will be left blind and unable to engage with shifts in their business environment. Adopting a forward-thinking approach requires careful planning and an anticipation of future developments. Our own hypotheses for the world after Covid-19 can be found in this presentation, and planning ahead is something with which Critical Resource has been helping clients through its global and jurisdictional horizon scanning and scenario analyses.
While a certain degree of cost-cutting is inevitable during a time of economic downturn, taking a short-term approach can leave companies unable to cope with additional shocks further down the line and one step behind competitors in pursuing new opportunities as they emerge. After all, the point is not to survive the shock, but to thrive in its aftermath.