When keeping up with ever-evolving news events, it’s easy to anticipate risks to your consumer business. But not all risks apply to your business.

It’s critical to identify market events that would pose an existential risk (i.e., brand boycott) or business model risk (i.e., trade war between two global players or an impending election in the country). This market sweep can help executives identify relevant scenarios to prepare for.

One way to begin this assessment is to look at geopolitical, economic, and social dynamics.

Where do you target consumers, operate your offices and factories, or source your products? Do you aspire to expand to any emerging markets overseas? For example, a home product department store that sources parts from Asia might flag a trade conflict as a relevant scenario. Similarly, a discriminatory law in a country you’re considering expanding to might impact your people and brand reputation.

Once you identify relevant geopolitical and social events, you can assess the level of impact that a scenario could have on your organization:

• Brand reputation
• Financial performance
• Geographic/market footprint
• Supply chain
• People and culture
• Operations

You’ll reach an important starting point through a series of inputs from your business’s leaders, in addition to an external perspective on the geopolitical and social tensions in that region of the world. This helps zero in proactively on the possible market shocks that could affect all aspects of the business, and sets the foundation for discussion.

Your board members and C-suite executives likely have a list of potential risks and threats already top of mind. This input is critical to ground your thinking on future operational risks, impending investments, and capital allocation.

Ensure that the relevant scenarios you identified are aligned with your senior leadership team’s top concerns. When you prioritize and present your scenarios to your organization’s leaders, they may provide a unique perspective that changes the way you assess their impact.

You’ve identified relevant scenarios, but how do you know when they actually take place? In today's times, any news clipping could send alarm bells off in your organization. It’s paramount to distinguish relevant triggers from noise in the market.

Triggers activate scenarios that can impact your brand, either financially, reputationally, or operationally.

An agile oversight committee is a dedicated group of team members assigned to monitoring scenarios, including 1-2 resilience sponsors to align committee activities with the board and capital planning.

This team should demonstrate a diversity of perspective in terms of position and experience, but also nationality or global experience to better understand and identify nuances from global events. At Deloitte, we leverage our global economists, in-country senior partners, and leaders to give us on-the-ground input into scenario development.

Business resiliency isn’t the sole responsibility of your PR or operations departments. For example, half of hospitality leaders² silo resiliency and risk responsibilities to a crisis team, which can lead to leaving senior leadership in the dark.

Resilient consumer businesses link and assess high-priority scenarios against relevant capabilities across their entire organization. Consider how you might distribute resiliency planning responsibilities in these areas:

• Senior leadership team and board
• Customer-facing operations
• Back-office operations
• Vendors and partners

Once you’ve identified your existing capabilities, consider how prepared they would be for an escalated scenario. We assess capabilities based on:

• Process: How clear and established are our processes? Are they well-defined, tested, and robust?
• Talent: Does our current staff possess the skills required to address an escalation? Does our operating model allow them address escalations efficiently?
• Technology: Do we have the right tools and infrastructure to manage a scenario?

This assessment is an important step in understanding today’s environment, and revealing a desired future state. From there, the assessment challenges leadership teams to develop a baseline of readiness to respond to each scenario and develop resilience.

Capabilities Maturity Assessment Ratings for capabilities range from:

• Initial: Capabilities are relatively nascent and untested against isolated incidents or a significant escalation.
• Developing: Capabilities are continuing to develop; basic escalation criteria and accountabilities are clearly stated.
• Advanced: Capabilities have been fully established, operating efficiently and tested against an escalation.
• Leading: Capabilities are indicative of industry leading practices.
  

Imagine a high-risk scenario took place. Trade conflicts result in losing your retail clothing store’s top supplier. Or, a brand boycott plummets your grocery store’s monthly sales.

Would your leadership team and board know how to respond?

They might say “yes,” and point to a recently updated crisis procedure manual, or experience from a similar scenario that happened two years back.

But your scenarios are relevant to today's industry, geopolitical, and economic events that might never have taken place before. Plus, some scenarios could unfold so rapidly that your procedures and playbooks can’t keep up.

What is a simulation?

Simulations imitate a scenario’s events to test how an organization’s senior leadership, board, and operations team react and respond to a high-pressure situation. They reveal an organization’s communication chain, departments involved, critical decision-making choices, level of agility, and gaps in resolving a threat or risk.

Here’s how Deloitte plays them out for our clients:

• Day 1: Assess operational and tactical, immediate response.
  • How does your organization find out about the news or scenario?
  • What actions does your operations team take?
  • Which marketing teams are engaged for reputational management?
  • How does the accounting or finance department adjust capital planning?
  • How quickly does everyone act?
  • What gets escalated to leadership?
• Day 2: Assess how the disruption is escalated to the board and leadership team.
  • Who starts the communication chain?
  • What are the leadership team's first responses to the scenario?
  • How are key stakeholders, partners, or regulatory bodies engaged?
  • How does the board ensure compliance in their response?
    

The simulation exercise brings the scenarios to life, and reveals how to adequately respond to protect existing revenue streams or create new ones. But the next step is one of the most challenging steps for leadership:

How do you allocate business resiliency capital?

1. Identify the “as-is” capabilities. Score the enterprise on its ability to respond to the market shock.
2. Identify the “future state.”
   • What will it take to be able to protect existing revenue? Perhaps the future state requires redesigning the supply chain to enhance productivity and identify opportunities for savings. 
   • How can you take advantage of opportunities (i.e., new trade routes between Canada and the EU to source products for a high-end department store)?
3. Analyze the gap. Set a roadmap for how to move from your current state to the future state. A gap analysis will help you align enterprise investments to an integrated business resiliency plan.

A scenario’s relevance to your organization could shift over time as economic, geopolitical, and social events unfold. Refresh and review your scenarios at a minimum of every six months to ensure they’re still relevant.