AURIMS CONFERENCE 2011 TOWARDS RESILIENCE MANAGEMENT David Martin 12 th May 2011 CHAIR CORPORATIONS RISK SYDNEY MANAGEMENT ROUNDTABLE

TOWARDS RESILIENCE MANAGEMENT 0VERVIEW New generation of thinking and actions Concept of resilience What are the current and emerging challenges? What are the wild risks What is effective Resilience Management Building Resilient & Sustainable Organisations Approach and methodologies for new challenges What is the value-add from good Resilience Management Where to from here – Beyond Resilience to Sustainable Businesses Key Points

A CRISIS IS NOW BECOMING PREDICTABLY PREDICTABLE Last 6 Months Unprecedented natural disastersUnprecedented natural disasters Terrorist attacksTerrorist attacks Volcanic eruptionsVolcanic eruptions Brisbane FloodsBrisbane Floods North Queensland CyclonesNorth Queensland Cyclones Bush firesBush fires Christchurch EarthquakeChristchurch Earthquake Auckland TornadoAuckland Tornado US TwistersUS Twisters Japan Earthquake, Tsunami, Nuclear PlantJapan Earthquake, Tsunami, Nuclear Plant What Next?What Next?

DEFINING RESILIENCE A Resilient Organisation is one that is able to achieve its business objectives and realise opportunities, even in the face of adversity. Resilience Management is the ability of an Organisation to survive an unscheduled disruption or major crisis from its ability to adapt using proven and integrated Risk Management, Crisis Management and Business Continuity Management processes using a single line of sight.

TOWARDS RESILIENCE - EMERGING RISKS RESILIENCE CHANGING WORKFORCE CULTURE & ETHICS GREEN IT CARBON CONSTRAINED WORLD GEN Y NEW STANDARDS & COMPLIANCE SUSTAINABILITY SYSTEMATIC CYCLICAL RISK AVAILABILTY OF CREDIT/ LIQUIDITY

THE RESILIENCE CHALLENGE Forward thinking Leaders are experiencing wake up calls with wider ranges of complex and compound wild risks and vulnerabilities creating the need to develop proactive and a robust Business Resilience strategy supported by a Resilience Management Framework To create a culture which encourages ideas and knowledge to be brought together, coalesced, and acted upon

RESILIENCE MANAGEMENT FRAMEWORK Planning Emergency Management Business Continuity Management Risk Management Adaptive Capability Testing A Resilient Organisation is one that is able to achieve its business objectives and realise opportunities – even in the face of adversity Increasing situational awareness will provide greater understanding of vulnerabilities that can critically undermine performance. Decision makers learn about underlying values systems and key individuals - relying on the culture Testing of plans and people response is essential to ensure realism

Resilience Indicators Situation AwarenessManage Key ThreatsAdaptive Capacity Roles & Responsibilities Understanding Hazards & Consequences Connectivity Awareness Insurance Awareness Recovery Priorities Planning Strategies Participation in Exercises Capability & capacity of Internal Resources Capability & capacity of External Resources Organisational Connectivity Silo Mentality Communications and Relationships Strategic Vision and Outcome Expectancy Information & Knowledge Leadership, Management & Governance Structures Aware of total operating system, including threats, opportunities, connectivity and internal and external stakeholders Those components of an organisation that have the potential to cause the greatest negative impact The culture of the organisation allowing it to make decisions in a timely and appropriate manner in a crisis.

REFLECTIONS OF A RESILIENT BUSINESS ASK THESE QUESTIONS Do we have the right infrastructure & processes to manage risk? Is the CRO empowered? Is our risk management process aligned with our strategic decision-making process and existing performance measures? Is our risk management process coordinated and consistent across the entire enterprise? Does everyone use the same definition of risk? Is our risk management process cost effective? Am I taking the right risks? How are the risks we take related to our strategies and objectives? Do we know the significant & emerging risks we are taking? Do the risks we take give us a competitive advantage? How are the risks we take related to activities that create value? Do we recognize that business is about taking risks and do we make conscious choices concerning these risks? Are we taking the right amount of risk? Are we getting a return that is consistent with our overall level of risk? Does our organizational culture promote or discourage the right level of risk taking activities leading to resilience? Do we have a well defined organizational risk appetite? Is our actual risk level consistent with our risk appetite including emerging risks in a rapidly changing environment?

RESILIENT AND SUSTAINABLE ORGANISATIONS AVAILABILITY OF CREDIT/LIQUIDITY New paradigm STRATEGY EXECUTION/MANAGEMENT Implementation/failure to execute good strategy Management in rapidly changing environment and changing culture STANDARDS & REGULATIONS Compliance obligations ASX/Principles 3, 4 & 7 ISO 31000:2009 International Risk Management standard AS/NZ 5050:2010 Australian Business Continuity Management standard APRA prudential standards

THE RESILIENT ORGANISATION

BEYOND RESILIENCE - SUSTAINABILITY SUSTAINABILITY RESILIENCE RISK MANAGEMENT COMPLIANCEGOVERNANCESOCIALCOMMUNITYENVIRONMENT CORPORATE CULTURE

DEFINING SUSTAINABILITY A sustainable organisation is one that effectively manages, reports and maintains its corporate, social, environmental and community responsibilities, where risks and opportunities are effectively identified and managed Sustainable organisations are built on ideals, values and resilience Value to shareholders, community and employees Framework of the environment & social issues – the need for external benchmarking Corporate social responsibility ratings – reputation/brand

WHERE WILL FOCUS BE IN 2012/2013 Focus on expedient and cost effective end to end value-add recovery solutions which have been tested New era Data Centres/Cloud computing Combination of the International ISO 31000:2009 Risk Management Standard & Australian AS/NZ 5050:2010 Business Continuity Management Standard Supply Chain risks increasing concerns and impact on Business Continuity and Resilience Increased uncertainty driving Resilience Management focus and assurance for Boards that Management is addressing key risks, business recovery and resumption, testing of recovery plans and integration into the organisations corporate governance Closer alignment of Risk Management, Business Continuity Management, Resilience Management and Sustainability

JAPAN – HIDDEN RISKS BENEATH THE ICEBERG

RECENT DISASTER – TOYOTAs RESILIENCE In the face of the recent MAJOR disaster in Japan and the compound wild risks of a massive earthquake, combined with a tsunami, and failure of a nuclear power plant I will present a scenario for discussion on: How you might adapt to such a situation What are some of the lessons learned Given the likelihood of further earthquakes and tsunamis what are the key actions you would do to address Resilience and Sustainabilty?

RESILIENCE MANAGEMENT CONTINUUM

AURIMS PARTICIPANTS WHERE ARE YOU AT WITH RESILIENCE READINESS? 10 ? ? 3 2 1

Times have significantly changed and we are facing increasing risks, uncertainty and unprecedented disasters in peoples lives and businesses New challenges driving new ways of thinking An embedded top down/bottom up Resilience Management Program and culture is about doing business better in managing opportunities, mitigating risks and becoming more resilient in a rapidly changing operating environment. SUMMARY Statistically 1 in 5 organisations will suffer a major incident every 5 years Now more about survival requiring simpler, practical, faster and tested solutions towards the focus on resilience

TOWARDS RESILIENCE MANAGEMENT & SUSTAINABLE ORGANISATIONS Thank you for your participation Questions and Answers AURIMS CONFERENCE 2011