“It is quite clear that the Asia-Pacific region is heading towards heightened levels of volatility. When you combine that with climate change and a pandemic in full swing, you get an operating environment in which leaders need to dramatically expand their peripheral vision,” says Dennis.
“Leaders will really benefit from thinking about possible futures and trying to anticipate the next crisis or the next shock, because there will be others in the very near future,” he said. .
The FinancialTimes reports that multinationals are drawing up contingency plans in the event of a US-China conflict, after Beijing launched an unprecedented series of drills around Taiwan this month.
“There’s a lot of scenario thinking going on, going as far as, ‘What should we do in the event of war? Should we close our operations in China? How can we sustain our activities and overcome any blockages? asks Jörg Wuttke, Director of the EU Chamber of Commerce in China.
BHP chairman Ken MacKenzie and his ANZ counterpart Paul O’Sullivan, who started his career at Shell, which pioneered work on scenario testing, recently said their advice to administration and their leadership also foresaw the “unthinkable” resulting from the conflict with Russia in Ukraine and escalating tensions with China over Taiwan.
“As business people, our role is to understand those situations, to understand the potential range of outcomes that can arise from a geopolitical situation,” MacKenzie told the Australian Governance Summit in March. “We call it a scenario analysis and then develop contingency plans around that to protect the business. It’s our job, but none of us have a crystal ball.
“I always say, hope for the best and plan for the worst. So everything goes from a scenario that would be a quick and peaceful solution, which we are all looking for, to the unthinkable,” he says. “And we just have to understand the implications for our business and take the lead.”
Former BHP public affairs director Tony Cudmore told the 2016 Australian Financial Review Business Summit that the miner had a “very well laid out crisis management plan” when the Samarco Dam disaster struck and a landslide wiped out an entire village and killed 19 people. .
“It happened on the afternoon of November 5 in Brazil, so Friday morning Australian time,” Cudmore said. “Very early on Friday morning, we had a very experienced team in the offices of BHP Billiton, sitting around the board table, considering … all the factors that would go into forming a response to this tragedy, the both in terms of understanding the human dimension, the environmental dimension, getting the facts on the ground in real time”.
Day says studies have shown that vigilant organizations are about twice as profitable as their vulnerable counterparts.
“There is a huge benefit to seeing earlier. It doesn’t have to be much sooner, but for example, if you sense new regulations, you can act maybe a week ahead of your rivals and lock in the distributors, lawyers and resources you need to to succeed.
Day says many of the changes that can be implemented are simple insurance measures. He points to the hard lessons learned by Toyota executives after the 2011 Fukushima earthquake and resulting tsunami disrupted supply chains of critical items such as chipsets that powered on-board computers of their cars.
After the shock, Toyota suppliers were required to hold a buffer stock of chips for up to six months of production and began practicing parallel sourcing. They now have several suppliers of critical components in case one falters, which puts them in a good position in the pandemic. Toyota was able to continue operating at 92% capacity, while Ford and GM operated at 60% capacity in the first half of 2021.
Day says his studies have found that the leadership teams of high-performing, vigilant companies are “collectively curious.”
“These teams have been very effective in building networks far beyond the boundaries of their industry,” he says. “They would have, for example, joined a blockchain institute ten years ago. They say: “We have no idea of the impact, but we must be celebrating to detect early developments.”
“The other characteristic is that these organizations were really diverse, and the more diverse the leadership teams were, the more effective they were at being alert and prepared.”