Organizational Resilience to Disruption Risks: Developing Metrics and Testing Effectiveness of Operational Strategies

Abstract

This study draws from the system resilience literature to propose three different metrics for evaluating the resilience performance of organizations against disruptions: the initial loss due to the disruption, the maximum loss, and the total loss over time. In order to show the usefulness of the developed metrics in practice, we deploy these metrics to study the effectiveness of two resilience strategies: maintaining operational slack and broadening operational scope, by empirically analyzing the performance of manufacturing firms that experienced a disruption during the period from 2005 to the end of 2014. The results show that maintaining certain aspects of operational slack and broadening business scope and geographic scope can affect these different metrics in different ways. Our results help decisionmakers in risk management to gain a better understanding of the conditions under which the recommended strategies actually improve organizations’ resilience, as well as the ways in which they may do so.

CEO's self-oriented perfectionism, strategic decision comprehensiveness and firm resilience

“…Firm age was included in the model as the logarithm of the total years since the firm's establishment, given that it may influence the strategic decision-making process (Yi et al. , 2022) and the experience of firms in dealing with disruptive events (Baghersad and Zobel, 2022). Firm performance was controlled because well-performing firms can provide more resources to support their strategies (Li et al.…”

“…From the aspect of firm-level factors, firm size was included and calculated by the logarithm of employees because larger firms can afford the costs to search for various information and alternatives for strategic comprehensiveness (Fredrickson and Iaquinto, 1989) and cope with adverse events (Baghersad and Zobel, 2022). Firm age was included in the model as the logarithm of the total years since the firm's establishment, given that it may influence the strategic decisionmaking process (Yi et al, 2022) and the experience of firms in dealing with disruptive events (Baghersad and Zobel, 2022). Firm performance was controlled because well-performing firms can provide more resources to support their strategies (Li et al, 2021) for coping with adverse events, measured by their return on sales.…”

Are the good spared? Corporate social responsibility as insurance against cyber security incidents

“…Business risks are inevitable in today's dynamic work environment (Baghersad & Zobel, 2022; Hashemi et al., 2019), with Christensen and Kohls (2003) identifying that crisis conditions are more likely as technology advances, meaning that recognizing and anticipating business risks is imperative for future success. Meanwhile, previous literature has highlighted a selection of benefits of incorporating ethical considerations into risk analysis frameworks (Hansson & Aven, 2014; Rozell, 2018).…”

Organizational Resilience to Supply Chain Risks During the COVID‐19 Pandemic

“…They explore key resilience measures that firms need to develop, to sense and respond to different disturbances such as social, market, financial and operational, and further assess their organizational impacts (e.g. Abeysekara, Wang and Kuruppuarachchi, 2019 ; Baghersad and Zobel, 2022 ; Brewton et al. , 2010 ; Narasimhan and Talluri, 2009 ; Wagner and Bode, 2008 ).…”