Operational resilience and stress testing: Hit or myth?
Gianluca Pescaroli () and
Chris Needham-Bennett ()
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Gianluca Pescaroli: University College London, Postal: University College London's Institute for Risk and Disaster Reduction, Rm 38, 2nd floor, South Wing, UCL Main Quadrangle, Gower Street, https://www.ucl.ac.uk/risk-disaster-reduction/
Chris Needham-Bennett: Needhams 1834 Ltd., Postal: Mermaid House, Puddle Dock, London EC4V 3DB, https://www.needhams1834.com/about-us
Journal of Financial Transformation, 2021, vol. 53, 32-43
The complexities of interconnected global risk and the growing uncertainties associated with emerging threats, such as the cascading effects of COVID-19, have challenged the existing approaches to business continuity management. Organizations are now implementing and maintaining “operational resilience”. However, operational resilience is distinguished by a lack of clarity as to how this concept can be translated into validated practices and the essential elements of such practices are sometimes obscured rather than clarified by its aggressive marketing to the practitioners. This paper develops a short perspective on what the strength and weaknesses of the current approaches to operational resilience are. We believe that while operational resilience as a concept is suitable for both professionals and scholars, it should be used with caution. We further suggest that its optimal application could be in combination with stress testing scenarios, which could be applied for defining common points of failures between distinct threats, to increase the flexibility of adaptation to complex crises. We propose five practical steps for bridging theories on cascading effects and systemic risk into mature practices for “thinking the unthinkable”.
Keywords: Criteria for Decision-Making under Risk and Uncertainty; Financial Risk and Risk Management; Operations Research; Crisis Management; Public Policy (search for similar items in EconPapers)
JEL-codes: H12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1667
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