What is Operational Resilience?
Operational resilience is a current phrase for an older concept called operational turnaround, an option available to businesses in under-performing or stressed situations, at or before the point of uncompromising insolvency processes and no return.
There are many businesses in this situation in 2021, supported, just, by government furlough and loan schemes.
In a nutshell, operational resilience fixes the underlying issues that got a business into an undesirable situation in the first place.
It is not operational in terms of an Operations Manager role, but coverage of a company's entire operations, including marketing, sales, engineering, IT, manufacturing or services functions, supply chain, finance, and the Board.
It is distinctly different from:
- A refinancing or restructuring plan that might repair the balance sheet of a business to buy more time or cash, leaving the causes of the situation still in place;
- Transaction work that sells/carves-out portions of a business at a high cost; or,
- Distressed M&A at fire-sale prices.
The most valuable aspect of operational resilience, which other options rarely fully consider, is the discovery phase in the first few weeks of client engagements. Discovery is dedicated to independent expert listening, researching, and analysing the often-overlooked root causes of change.
There is a great quote from Albert Einstein that encapsulates the discovery phase of operational resilience and the need to do the right kind of proactive analysis:
“If I were given one hour to save the planet, I would spend fifty-nine minutes defining the problem and one minute resolving it.â€
Boards and investors frequently do not find the root causes of rapid change to their considerable loss and expense in restructuring and transactions work; or worse, insolvency processes.
A thorough discovery and definition of the problem for any business take between two and six weeks in practice.
The insights from commercially-focused operational resilience practices help achieve higher probabilities of stabilisation, sustainable recovery, and renewed profit and regrowth.
I hope you find the explanation useful.
Simon C Jones
Certified Turnaround Professional.
CIC Consulting
4 å¹´Absolutely correct, refinancing does not replace operational restructuring. The causes must be found and permanently remedied. Our economy does not suffer from lack of money or high financing costs. There is a lack of innovations, increased productivity and digital progress.
Senior Advisor, retired
4 年You’re right that operational turnaround is the best way forward for businesses in difficulty - fix the cause of the problems, not just the balance sheet. Thank you Simon
Highly commercial Chartered Accountant with a long career in industry. CFO and extensive M&A experience
4 å¹´Couldn't agree more. My heart sinks when I see yet another "rescue" announced when all that has happened is the balance sheet is restructured and the business operations are left the same. You just know that it will be back in the same place before long. It takes all the pressure off management to address the real issues. Got to agree with Dr Harry Moore that IP's should not be allowed to call themselves turnaround professionals.
Business Turnaround, Board Mentoring, Public speaking, Non Executive roles.
4 å¹´The inevitable results of financial reconstruction on its own. Putting things back on the shelf if the shelf is broken is pointless.
The majority of turnaround professionals are from a finance and a legal background. There is undoubtedly an opportunity and need to bring a customer and market perspective to turnaround.