One of the management functions that has acquired a great deal of significance in recent years is risk management. This has occurred as business continuity became more important. Businesses were expected to assess their risks in order to ensure better control – so that the continuation of their operations would not be jeopardised.

In a lighter vein, all sorts of conspiracy theories were conjured up and imaginary chances were thought of to identify the real and not-so-real risks. Risk management processes were put into place to reduce both the possibility of a risk occurring and its potential impact. As a result, a new occupation came into being as this management function was assigned to a specific post.

We need to admit that management of successful businesses has always sought to identify, control and mitigate risks, but in the last years this has turned into something more systematic and, possibly, more scientific. All this was fine until shock waves started coming and unexpected events happened.

We experienced the first shock wave with the crisis in international financial markets during 2007, which caught many businesses and governments unawares. So, no matter how precise businesses were trying to be to manage their risks, this crisis came about like a tsunami. Somehow, with the support of central banks (European Central Bank, Federal Reserve and Bank of England, among others) through their quantitative easing policies, we survived.

There were some who said that the financial crisis and subsequent credit crunch and economic recession could have been foreseen. However, what happened in the last three years could barely have been forecasted: COVID-19; the Russian invasion of Ukraine; a rate of inflation last seen decades ago; disruption in the supply chain; a significant increase in the cost of transportation of goods; financial markets becoming extremely volatile; changes in the world of work; changing employee attitudes and behaviours; and skills shortages. The list is both long and frightening.

These developments have really hit businesses hard because they had not identified them as possible risks. As a result, no mitigation measures were taken. And if they were taken, they proved to be inadequate. They uncovered the sensitivity and vulnerability of economies and businesses.

The interesting consequence of this is that businesses have now started to question the real function of risk management, if unexpected events will become the norm. We know that climate change will affect us negatively and that we can expect extreme weather conditions, but we cannot anticipate when floods or drought will hit.

Now the word is ‘resilience’. We may think of it as a fad, like any other that came before it. Again, there will be successful businesses which will claim having become resilient over the years, thus possibly tackling even tales of the unexpected. Even so, there is now a trend to develop resilient businesses. On a parallel note, governments need to develop resilient economies.

In fact, as a country, we do know something about economic resilience. Our economy has proved to be resilient time and time again whenever it faced challenges. This has been mainly due to the wide range of economic activities we have developed over the years since independence.

It is essential that businesses operating in Malta remain adaptable

A resilient economy also means resilient businesses. This explains why it is essential that businesses operating in Malta remain adaptable. They need to be able to respond to the vulnerabilities exposed by a volatile and challenging external environment.