The steps to a resilient organization.

• Author: Kavanagh, Shayne C.

The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage

By Yossi Sheffi

The MIT Press

2007, 352 pages, $19.95

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The Government Finance Officers Association has recently been promoting the concept of financial resiliency to help local governments succeed under adverse conditions by becoming more adaptable to changing conditions and more regenerative in the face of setbacks. The idea of organizational resiliency has been receiving attention in private-sector management literature, as well. Yossi Sheffi's The Resilient Enterprise was one of the first books published on the subject. While his treatment of resiliency revolves around reducing vulnerability to disruptions in supply-chain management in industrial production processes (a process with no ready analogue in most local governments), it does hold some insights for public managers.

STEPS FOR REDUCING VULNERABILITY

Sheffi's approach to reducing vulnerability comprises the steps below.

Organizing for Action. This step is commonly associated with creating a disaster recovery plan, but broad-based risk-awareness should be built into the fabric of the organization. This might start by designating a chief risk officer, but it must also include formal processes for assessing the risks of business decisions and strategies. (Enterprise risk management is an example of one such approach.)

Assessing the Vulnerabilities. An organization needs to assess potential disruptions according to likelihood and potential severity. This exercise helps managers decide which disruptions to focus on as they move forward with actions to reduce the probability and impact of potential disruptions. Sheffi recommends considering accidents, natural disasters, and intentional disruptions (e.g., strikes). The first two are probably of most immediate relevance to local governments. For natural disasters, historical experience can be used to estimate the potential for a major disruption over a given time interval. For accidents, Sheffi recommends "near miss analysis." Widely used in private industries such as airlines, near miss analysis draws on experience from events that almost caused a significant disruption to avoid actual disruptions. In fact, research has shown that many smaller accidents foreshadow more serious ones later, so there is proven benefit in learning form the experience of near misses.

Reducing the Likelihood of Disruptions. Once potential disruptions are...