Set Impact Tolerances

Operational Resilience refers to the ability of an organization to continue its services despite unforeseen disruptions. But responding to those disruptions is equally important.

Are you aware of the threats and vulnerabilities to your organization? Understanding them is crucial to assessing your company’s resiliency position. You can gain insights to your company’s resilience by monitoring and testing throughout your supply chain to determine the weakest links in relation to your services and those that support them. Once they are identified, you can take precautions to remediate the issues and strengthen your company’s resilience.

One way to increase your operational resilience is to automate the enforcement of guardrails for your business operations by setting impact tolerances. Impact tolerance is the maximum tolerable level of disruption to an important business service, including the maximum tolerable duration of a disruption. You can use impact tolerances to help you assess how a disruption might affect your customers. Firms should set impact tolerances annually, at minimum, as a tool to discover and plan for possible disturbances.

First, identify the most crucial service of your business. Then map out all of the services and resources that support that function, like employees, IT, third parties, etc. Gather data that summarizes your day to day operations when they are functioning at normal levels. You can use this data to determine how your business will be impacted by specific scenarios. Assess how the business is affected by setting impact tolerances, and use those impact tolerances to test your company’s ability to operate within impact tolerances of varying situations. Finally, review your findings and develop a system to test and monitor operations frequently.

Specific forms of measurement should be put in place to best calculate the maximum tolerable level of disruptions. Use these key metrics to help you identify any possible harm or threats to consumers, market participants or integrity, as well as policyholder protection, safety or economic security.

Setting impact tolerances is kind of like a safety net: it allows you to test your readiness when it comes to a serious disruption in your firm’s delivery system and discover secondary processes and procedures to put in place when your primaries fail. You can run through these potential problems to see how you will operate in an emergency, and catch yourself when fallen into a disruption. This will allow you to be more ready when you experience a hiccup in your business, as well as a plan of how to best move forward.

It is important to choose only one of the most important aspects of your business to test at a time to set an impact tolerance for. It must be based on one specific disruption to your business. Setting one at a time allows you to focus on an isolated issue and identify the levels of disruption, ranging from customer inconvenience to harm and intolerable harm. You can run through these scenarios as often as you need to in order to formulate corrective action and return delivery service to your consumer with the least amount of harm. Setting these levels will help you better understand the risks to your operations and how to withstand the levels of disruption.

Organizations use impact tolerances to evaluate their operational resilence and readiness to disruptions in operations. While not all disruptions may result in harm, it is best for businesses to routinely test their resilience to better react to impacts and minimize overall disturbances.