Given the current economic uncertainty in the marketplace, most businesses are taking a more conservative approach to their operations, investments, expenses, talent acquisition and retention efforts.

At the same time, Wall Street is scrutinizing earnings reports. Business leaders still feel the same pressure to grow revenue and margin. The result: everyone’s trying to do more with less, or at least without commensurate financial and talent support that may have aided the business in prior years.

The stress this creates for the people, processes, and systems that support day-to-day operations represents a shift in the risk profile of a business that many executives do not recognize and which many risk management departments move too slowly to identify.

If pushed too far, the results can be catastrophic: This year it became clear Norfolk Southern did not invest enough in safety measures to prevent its derailment in northeastern Ohio, and Silicon Valley Bank failed to shift its risk management posture to adjust for Fed rate hikes prior to the draw-down of deposits that ultimately produced a run on the bank.

Certainly, tough business decisions have to be made to position companies to weather the economic uncertainty ahead, but executives should be talking to their consultants and advisors on a regular basis about how those decisions change the risk profile of the business.

They should be asking:

1. Where are we putting more pressure on the business: which people, systems, and processes might feel the strain?

   For example, production targets might remain steady despite cuts to the number of employees involved in production. Capex investments might be deferred in the hopes equipment can last another year without refurbishment or replacement. Physical plant expansions might be put on hold. The legal department might be looking at the same number of contracts, but with fewer lawyers. Lower cost raw materials might degrade product quality in unanticipated ways.

2. What would a major failure in any of those divisions or departments look like?

   For example, a consumer food company might see a foodborne illness slip through a stretched food defense system. Putting off an investment in data security could open the company to a ransomware attack. Maintaining production targets while reducing staff could lead to product mistakes that cost customers.

3. Is the company prepared to be resilient in the face of each of these scenarios? Is executive leadership capable of taking control in a crisis, developing the right response strategy, and providing the leadership necessary to preserve its customer base?

   The skills necessary to respond effectively to crises are often very different from those business leaders use to run the business on a day-to-day basis. Company leadership should have a disciplined, analytical approach to assessing how a crisis affects their business and its stakeholders and developing response strategy. Those skills should be kept sharp through regular practice.

4. Is each new areas of risk covered by the company’s enterprise risk management program? Are all the potential crisis scenarios covered by the company’s crisis readiness planning program?

   A company’s crisis management consultants should constantly help the organization re-evaluate its risks and potential scenarios to ensure the organization isn’t caught flat footed without a roadmap to crisis resolution.

These are difficult conversations. Executives too are trying to do more within schedules that were already jammed. Consideration of potential scenarios can easily get crowded out by the day-to-day challenges in running the business.

Furthermore, executive teams learned to be nimble during the pandemic and some think that experience would enable them to manage any situation. But, crises affecting a single company or brand focus scrutiny from stakeholders and the media, and can quickly undermine confidence in the organization’s capabilities or character in very damaging ways.

Business leaders and their boards have legal, fiduciary, and moral responsibilities to protect their organizations and stakeholders appropriately as the economy shifts. Many businesses roll the dice and avoid facing a crisis, but investing in preparedness could make the difference between survival and failure if a crisis occurred.