Response to Call for Evidence from the Integrated Review
In response to the UK Government’s Call for Evidence in connection with the Integrated Review, the Chair of the National Preparedness Commission, Lord Toby Harris, has written to the Paymaster General, the Rt Hon Penny Mordaunt MP, explaining the role of the NPC and commenting on the Review. The commentary is shown below.
The comments also constitute the joint submission from the National Preparedness Commission and Resilience First in response to the on-line questions in the Call for Evidence. (The detailed questions and answers can be found on the Resilience First website.)
The National Preparedness Commission, which brings together 45 leading figures from public life, academia, business, and civil society, had its first meeting in November 2020, although it was conceived before the onset of the COVID pandemic. Its mission is to promote policy and actions so that the UK is significantly better prepared to mitigate, respond to, and recover from, future major shocks, threats, and challenges.
To this end, the Commission is overseeing a programme of work that is both strategic, recognising that what is needed to be better prepared for many shocks is the same whatever the initiating crisis or incident; and practical, to encourage immediate action to avoid defaulting to merely ‘admiring the problem’. Its primary focus is on the UK and the Commission is looking not only at what should be done nationally, but also at local and community level, what businesses and voluntary organisations need to do, and how individuals and households can be better prepared.
The Commission recognises that the increasing complexity of our society and its systems brings many benefits but potentially creates its own fragilities. The objective of the Commission is not to criticise what has gone before, or denigrate the extensive work that has been done by many organisations and individuals. Rather, it is focused on what needs to be done systemically to improve societal preparedness and resilience, drawing on any lessons from the current COVID crisis. It is therefore forward looking: considering preparations for the next challenge rather than, with the benefit of hindsight, obsessing over how previous challenges might have been met differently, or better.
The Integrated Review
The Commission welcomes the publication of the Integrated Review and, in particular, the section within it on ‘Building Resilience at Home and Overseas’. The commitment within the sub-section on ‘Building the UK’s National Resilience’ to build national resilience against acute shocks and longer-term threats by developing a comprehensive national resilience strategy is timely and much needed.
Making every level of government, every organisation, and every community, more resilient will help to ensure that the UK as a whole is better able to absorb and respond to future global crises – whether a new pandemic, a massive cyber-attack, climate change, or something genuinely unforeseen. This is also true for each household and every individual. As recognised in the Call for Evidence, everyone can and must play their part. Genuinely, as somebody once said, we are all in it together.
This approach is long overdue. The need to overhaul the National Security Risk Assessment process was highlighted earlier this year by Suzanne Raine in a paper for RUSI, and the Institute for Government has also recently listed 10 lessons from the pandemic for government in responding to shocks. In addition, RUSI’s Modern Deterrence project has for a number of years demonstrated how a ‘whole-of-society’ approach to resilience is increasingly necessary in the age of hybrid and ‘grey-zone’ warfare, and that societal resilience is a vital component of that deterrence.
However, this developing consensus should not lead to the assumption that any of the above is easy. Indeed, some of the changes needed are generation-long endeavours. For the last 50 years or so, the UK economy has increasingly been organised on a ‘just-in-time’ basis, reducing production times in manufacturing, and cutting stockpiles and margins to boost efficiency, reduce costs, and maximise returns. However, as the Financial Times argued in an editorial last year:
‘The Covid-19 outbreak has exposed the thin margins on which much of global business runs. Highly indebted companies, working from lean inventory, supported by just-in-time supply chains, and staffed by short-term contractors, have borne the brunt of the sudden blow. They will now suffer the rolling, longer-term impact of its unpredictable consequences … companies must transform their supply chains from ‘just in time’ to ‘just in case’ models.’
Over the same 50-year period, critical infrastructure systems have – again in the name of efficiency – reduced levels of redundancy. In 2015, the National Grid had a spare power capacity of just 1.2%, the worst in a decade – and far below the margins available in the 1970s and 1980s.
Freeing up the resources to correct this imbalance will be the real challenge in the coming years: indeed, some of the changes needed will be generation-long endeavours. The overarching task arising from the Integrated Review will be for the Government to promote and support more agile and active resilience across the public and private sectors, as just one part of the whole of society approach.
Towards a National Resilience Strategy
The Commission believes that there are some fundamental questions that a National Resilience Strategy needs to address. These were set out in the paper Strategic Issues: A discussion paper. If we are to strengthen our resilience and preparedness as a nation in a world that is increasingly volatile and unstable, the Strategy needs to decide:
What should we be preparing for?
- Should there be, for planning purposes, a set of plausible, generalised emergency scenarios?
- What resources should be invested in foresight analysis and horizon-scanning studies?
- Who should have oversight of this and where should responsibility lie for taking action in response to emerging indicators?
Who should finance the investment in preparedness?
- Can it be mandated, or required as a regulatory obligation? Would such an approach work in all sectors and contexts?
- What is the role of insurance? Insurance has often been the way that risk and lack of preparedness have been managed, but it does not finance preparedness as a positive activity. Should the insurance industry do more?
- Can the experience of safety investment in some sectors, such as nuclear and aviation, provide a model? What were the drivers for such investment? Was it a regulatory or legislative requirement? How was it policed? Can a ‘near-miss approach’ be used to justify investment?
- Cyber security investment is now becoming (at last) a visible activity. What can be learned from what made it viable now?
How much preparedness is enough?
- Can it be valued financially?
- How can adequate preparedness be embedded in society as a cultural norm?
- Are standards a barrier or a liberator for preparedness? Do they level up or down? Do they foster or stifle innovation?
How do the interactions and dependencies between preparedness domains play out and who is responsible for them?
- Who should take the holistic view, and who should act on it?
- How do we deliver joined up preparedness, that is fit for purpose, and proportional?
- Who pays for systemic resilience?
- Where does accountability lie?
In support of this, the Commission has established a series of work programmes that will be producing reports on the following themes over the next year or so:
- Building cross-sectoral resilience across the public and private sectors:
- What are the key challenges that impede public-private cooperation in pursuit of national resilience, and how can how such co-operation be fostered?
- What could be the role of regulatory frameworks?
- Is there a case for standards?
- How to use data as a vital enabler?
- Harnessing the power of the market to promote resilience and preparedness:
- How can market mechanisms be leveraged or supplemented to incentivise resilience?
- Accounting for and reporting on preparedness and resilience:
- How can a value be placed on investment in preparedness and resilience, to support positive investment decisions enhancing the resilience and sustainability of organisations?
- How to balance the cost of building resilience with the value of being prepared?
- Societal resilience:
- What works best at local level to reinforce community cohesion?
- Preparedness and place:
- What are the key components that make a locality a successful and resilient place for people to live, work and do business?
Vision and Principles underpinning a Resilience Strategy
The Cabinet Office paper ‘The National Resilience Strategy: A Call for Evidence’ sets out a definition of resilience and proposes an overarching vision and principles for the Strategy. While the vision is admirable, resilience is not a destination. Rather, it is a journey with better preparedness as the outcome, and total resilience always being over the horizon. Thus, the proposal to ‘make the UK the most resilient nation’ begs the question by what comparison and measure, and over what timeframe (2030 is mentioned in the paper). Given the undoubted scale of the challenge, is that realistic? And how will we know that we have succeeded?
The paper also talks about the objective ‘to build a more resilient UK together’. This should be at the heart of the vision with ‘together’ relating explicitly to stakeholder, and not just shareholder, value. The lesson must be that no organisation can be resilient unless the whole system is resilient.
The notion of ‘adapting to uncertainty’ is a key element in resilience yet ‘adapting’ is missing from the definition of resilience used in the Call for Evidence paper. The British Standard BS 65000:2014 ‘Organisational Resilience’ defines resilience as the ability of an organisation to anticipate, prepare for, and respond and adapt to incremental change and sudden disruptions in order to survive and prosper. While ‘adapt’ is mentioned 21 times in the Call for Evidence, it is neither explained nor expanded upon. Adaptation is about addressing the effects not the causes of the problem, whereas mitigation is about addressing the root causes of the problem rather than dealing with its effects. This is an important distinction which gets to the heart of what resilience means, and on which better preparedness is founded.
Furthermore, the definition provided in the Call for Evidence talks of ‘bouncing back’ or ‘returning to normal’ – in practice the status quo ante. But should the emphasis not be upon ‘bouncing forward’ to a new and improved state so that one is better prepared for future shocks? There needs to be a ‘new normal’, as the pandemic has harshly revealed. Identifying, learning, and implementing lessons will help transformation to the new state.
The three core principles described in the Call for Evidence (understanding the risks, investing in preparation, and energising and empowering everyone who can make a contribution) are worthy ambitions. However, they are not the fundamental values that should permeate all activities. These should be focused on themes such as collaboration, innovation, leadership, transformation, communication, and (importantly) adaptation. Adopting the military model of leadership, based upon the principle of commander’s intent and mission command – empowering those closest to the action to use the resources available to them in the most effective way to address the specific challenges they face within an overall strategic framework – is worth consideration. (See: ‘What is the military leadership model’ by Sir Ian Andrews and ‘Operational Resilience: applying the lessons of war’ by Gerhard Wheeler.)
Ways of interpreting and applying resilience principles and practices can be found, for example, in Resilience First’s A Resilience Guide for our New World.
An alternative approach to stating principles is proposed in the National Preparedness Commission’s paper Resilience Reimagined. This outlines five ‘capitals’ that underpin resilience. These are listed as: financial, human, built, social, and natural. Each has a corresponding set of impacts. The paper also makes the point that ‘The development of resilience is an adaptive rather than a technical process.’
The Commission’s Building Better Resilience report also makes the important distinction between ‘active’ and ‘passive’ resilience:
‘Resilience comes in two distinct forms, which we refer to as passive and active.
Passive resilience is the ability to absorb disturbance, recover quickly from a setback and return to normality. This is the colloquial sense of the word, which equates roughly with being robust. Expressed in terms of risk, passive resilience is about reducing the impact of a disruptive incident by reducing the size or duration of its harmful consequences. Passive resilience is clearly a good thing, and we should all aspire to have more of it. However, there is – or should be – more to resilience than absorbing blows.
Active resilience means growing progressively tougher by learning from adversity and becoming better able to avoid and manage future stresses. Actively resilient people or organisations do more than just return to their prior state after an adverse event: they continually learn from their experience and develop stronger defences, making them better able to resist the next time. They are less likely to experience a crisis, more likely to cope better if they do.’
This distinction should be included in any reworking of the definition in the forthcoming National Resilience Strategy.
Assessing and Communicating Risk
The Call for Evidence states that the Government is reviewing aspects of the methodology that it uses to assess risk. It is doing this in partnership with the Royal Academy of Engineering. This is welcome.
However, the concept of ‘prediction’ is a false art: the world is more complex and uncertain, and hence unpredictable. There is a danger of misreading risk because of a number of inherent, and often unconscious, biases which inhibit timely action.
This is explored in the Commission’s report Building Better Resilience. We need to recognise that our minds tend to be programmed in ways that make it hard to respond to novel risks, and to protracted and complex challenges. In particular:
- We find it easier to believe that something might happen if it comes easily to mind. The more we can picture it, the higher our intuitive estimate of its likelihood.
- Then there is optimism bias, predisposing us to be over-optimistic about the risk of something bad happening and over-confident about our ability to cope if it does. At worst, this can result in outright denial. A recurring feature of protective security and resilience planning is the need to experience a major attack or disaster before converting thought into action.
- In addition, it is harder to form sound judgments about how much effort to invest in preventing low likelihood/very high impact risks.
A particularly stark example of this is perhaps the Department of Health’s extant 2011 Flu Pandemic Strategy. This foresaw a ‘reasonable worst case’ scenario of 215,000 – 315,000 deaths in just 15 weeks, with the NHS overwhelmed. But the response did not envisage lockdowns, school, or border closures, or any of the other restrictions on liberty that were subsequently adopted. These, of course, were outside the remit of the DH to implement; but they could have been pointers for others across government, and elsewhere, to act on. People are also subject to confirmation bias (the universal tendency to pay attention to what supports our existing beliefs, while ignoring information that contradicts them), and to group think (the inclination to follow the pack and conform to the majority view).
Any National Resilience Strategy needs to ensure that these inherent biases are addressed not just within Government, but also outside in all the other public-, private-, and third-sector organisations that need to be partners with Government in delivering the strategy. It should consider the provision of independent, external challenge, or ‘Red Teaming’, with a commitment to provide an audit trail to the response.
A critical part of any national approach to preparedness must be horizon scanning and, as was argued on the Commission’s website by Professor Brian Collins, it is to be welcomed that the Government is looking at a more holistic way of improving policy-making methods, so that it is informed by the past, imagined futures, and creativity. It is also encouraging that this area is to be incorporated into the education and training of policy makers of all departments. However, it needs to go further and be devolved to cities and local government where preparedness is at a different scale but needs to be similarly informed by the past, by plausible futures, and the current situation. This approach should be appropriately disseminated to such devolved bodies.
Furthermore, this horizon scanning needs to transition from early warning into proactive, and timely, action. The European Flood Alert System (EFAS) for flooding is an example of those responsible failing to act on the warnings provided. The National Preparedness Commission will be publishing a report in the autumn on warnings and alerts. This is being prepared by the Warning Research Centre and the Department of Science and Technology Studies at University College London and will seek to focus on the question of what a warning should be and do, what makes an effective warning and alert system, and how such systems should be managed.
The Threat-Neutral Approach
With so many risks (both known, and unknown) a generic, threat-neutral, approach to resilience is needed to ensure that actions are focused on consequences rather than causes. This would avoid the danger of cascading and systemic risks (high impact, low probability) being given less consideration than low-impact, high-probability risks – and being caught short. However, it would require fewer and more permeable ‘silos’ to be allowed to operate in organisations, including across government.
Because the traditional, quantitative, probabilistic, approach to risk is no longer valid for modern times, there is a strong argument for moving from a risk to a resilience-based model of management. Past trends are no longer sound indicators of future trends in an unstable system. Instead, a more qualitative, dynamic approach is needed that uses a virtuous cycle of prepare-respond-recover-adapt. (See for example Resilience First’s report ‘Transitioning from risk to resilience’ or the Centre for the Study of Existential Risk paper on Risk Management in the UK, which discusses the shortfalls of, and possible solutions to, the current NSRA/NRR model.)
The Commission’s Resilience Reimagined report made three recommendations to Government and the Commission hopes that these can be incorporated in the National Resilience Strategy. These were:
- Enhance access for organisations of all types to evidence about multiple hazard-related risks, including the use of futures thinking, foresight techniques, and real-time notification and early warning systems.
- Align resilience policy across economic, health, social, infrastructure, and environment to build system-wide preparedness to complex threats.
- Use regulation to challenge organisations to demonstrate their resilience, and to consider their contribution to the resilience of their sector and to society.
The report also offered seven recommendations for organisations more generally. The Strategy might wish to promote the same approach.
Responsibilities and Partnerships
The Call for Evidence rightly observes that ‘local authorities and responder agencies play an integral part in planning for, response to, and recovery from, any emergency, whatever the scale’; and that ‘the local tier must continue to be the fundamental building block for UK resilience’. This emphasis is welcome, although it has not always been apparent. Certainly, the pandemic has shown the value and importance of subsidiarity.
As a general principle, it needs to be recognised that, in most incidents, it will be the local and community response that is best placed to have the greatest impact in dealing with the consequences. Nevertheless, the larger or more complex the incident, the greater will be the need for the support from outside, and the need for effective coordination at regional and national level. Resilience requires a focus on the local, coupled with robust regional and national capabilities and structures in support.
In advance of the Cabinet Office’s statutory review of the workings of the Civil Contingencies Act 2004 that is due next year (and in consultation with them), the Commission is undertaking its own independent review led by Bruce Mann, Andy Towler, and Kathy Settle, to look at experience of the implementation and operation of the Act, of the civil-protection structures it introduced, and its associated regulations, guidance, and key supporting arrangements, and to make recommendations for improvements.
The key objectives of this will be to address:
- Whether the Act and its supporting arrangements, taken overall, have achieved the Government’s and Parliament’s original strategic purpose and intent?
- In particular, the effectiveness of collaboration and governance arrangements, at all levels from local to national, on which all experience shows that effective civil protection depends?
- Drawing on experience since 2004, including in the response to the Covid-19 pandemic, how best in future to engage the business sector in all aspects of risk and emergency management?
- Whether, taking account of the future risk picture facing the UK, and of experience gained since 2004, there is a need to make changes to the Act and its supporting arrangements to meet the UK’s potential future civil protection needs? Are changes needed to the Act and its supporting arrangements to improve the UK’s ability to handle the most severe future emergencies, of whatever nature?
This review is independent, but in terms of current local risk-assessment processes operated through Local Resilience Forums, there are already strong pleas being made for the business community to be better represented and co-ordinated across the board, particularly with large national organisations. Some major retailers have sizeable logistical capabilities, for example, and are keen to help; but there is no inter-operability mechanism to ensure effective delivery. The Grenfell Tower fire is a case in point. (There was an announcement after Grenfell of a National Co-ordination Task Force but, sadly, nothing came of this.)
As is acknowledged in the Call for Evidence, business has an essential part to play in any national resilience strategy, if only because it owns and operates around 80% of the critical national infrastructure. Engagement with the Security and Resilience Industry and Suppliers Community (RISC) is welcome; but it needs to extend further. Major companies also manage the largest logistical networks in the country, around which ‘normal’ life depends. And, as has been demonstrated by the pandemic, individual employers, both large and small, have a vital role to play in ensuring the wellbeing and resilience of their customers and employees.
In general, business is willing to help in an emergency but the co-ordination with government at departmental level has historically been poor. While Grenfell was an example of poor co-ordination, COVID has shown better levels of collaboration. But this needs to be put on a standard footing at senior (ministerial) level for the future. Organisations like the Centre for the Protection of National Infrastructure and the Joint Terrorism Analysis Centre should assess wider threat profiles and provide holistic, and timely, advice in language which will be readily understood by those who need to act on it.
Similar arguments can be made for the voluntary and community sectors (VCS) which are essential partners, alongside the public and private sectors, in a ‘whole-of-society’ approach to preparedness, resilience, and response. Convincing evidence of this has come through the many ways in which the VCS has responded effectively to the COVID-19 pandemic:
- About 12.4 million volunteers have stepped forward during the pandemic, with 4.6 million being volunteers for the first time (Together Report).
- In order to provide support for vulnerable and shielding members of the community (the NHS Volunteer Responders Scheme) and, subsequently, for stewarding in vaccination centres, the Royal Voluntary Service recruited in quick time and managed over 470,000 volunteers via the GoodSam app. St John Ambulance recruited and trained 30,000 volunteer vaccinators.
- Local VCS organisations and mutual-aid programmes have also provided volunteers, often in partnership with local authorities, the Local Resilience Forums (LRFs), or primary and social-care providers. Inevitably, the local response has been variable, depending on the strength of the local sector, the seriousness with which local leaders had taken their statutory responsibilities, the financial resources available to the local VCS infrastructure, and the quality of relationships with local authorities, and with each other.
- The British Red Cross has piloted a community resilience programme in six London boroughs that has involved local groups and communities to explore what people need during emergencies and to help them map assets, share knowledge, and link with local authorities and LRFs.
As Stephen Dunmore argues in his article for the Commission:
‘The fundamental question which now needs to be considered and answered is how can the VCS’s key role in preparedness best be co-ordinated, resourced, and supported, both by central and local government and within the sector itself. When the next crisis hits, the VCS needs to be ready with a fully integrated sector response and volunteering offer at national and local levels.’
The VCS, as well as the SME sector, is highly volatile with many entrances and exits in any time in a crisis. Yet, both are vital to dealing with an emergency as the response to the pandemic has shown. The speed with which not-for-profit organisations mobilised to arrange foodbanks for the poor and meal deliveries for the isolated was literally a life-saver which probably also played a major role in preventing civil disobedience because the hungry were fed without the need to loot. Similarly, that speed was equalled by SMEs moving swiftly to fill gaps in the system by, for example, switching from their usual business to procure or manufacture PPE. It would have been impossible to prepare either sector to respond like this given the many unknowns involved. However, a sense of collective mission galvanised the responses and helped the nation to survive an existential threat.
The idea of a College of National Security, as advocated in the Integrated Review, would be a good step to achieve better awareness and co-ordination across the public, private and voluntary sectors. Scandinavian countries have been able to adopt comprehensive training and preparedness models which are worthy of consideration. Sir Ian Andrews, in his article for the Commission, argues that the concept of a college might explicitly be extended to embrace ‘Resilience’, has the potential to help attract, develop, and retain, diverse and highly capable staff for the UK national security community with the skills and experience to enable the delivery of national security ambitions and policy. It could also provide: a source of professional skills accreditation focused on real-world applications; deliver the community of skilled and experienced practitioners needed to form the diverse multi-disciplinary teams able to operate across physical and digital platforms envisaged by the Integrated Review; and represent a recognised source of professional authority in the field of national security and resilience.’ But it must not be constrained by inappropriate security restrictions if a genuine public conversation about better preparedness is to take place. He concludes that:
‘From the perspective of national preparedness, a dedicated College for National Security represents an invaluable, and perhaps overdue, investment in delivering the ambition for greater resilience at home and overseas which is at the heart of the Integrated Review.’
Community and Local Resilience
The emphasis on a ‘whole-of-society’ approach as a vital pillar of the Integrated Review is welcome; but the challenge is how to divert resources to make this a reality.
As Professor Duncan Shaw argues:
‘Thinking about local and national risks should include thinking about the local and national resilience capabilities that deal with those risks, so that we understand the fragility and strength of our systems to disruptive events. One strength – not formally recognised as a resilience capability – is community resilience.’
The Commission is actively pursuing a programme to help advance societal resilience. Working with Professor Shaw at the Alliance Manchester Business School, and with support from the Joseph Rowntree Reform Trust, the aim is to:
- identify what has been experience of Covid-19 in terms of confidence in democracy and democratic structures; and
- demonstrate what effective societal resilience might look like; and recommend practical initiatives to reinforce community cohesion.
In addition, it is intended that work will be done to look at young people and resilience, resilience skills education in schools, the role of volunteers and reserves, sharing community intelligence in a crisis, and public information materials and the role of local authorities, utilities, etc.
Communication has been shown to be a vital component in tackling Covid-19 and needs much further work to be fit for future major disruptions. The public appetite on the back of the pandemic may now allow a more proactive and regular communication message to all households that offers advice on preparedness – an all-risk approach that alerts, but does not alarm. It may now be timely to consider the sort of household preparedness guide sent to every household in Sweden (see the article written by Ed Persson for the Commission ‘If crisis or war comes’).
However, warnings to the public need to be more specific and action-oriented that those that currently exist in, for instance, the terrorism threat levels (see Resilience First article). This will be important in any nationwide alerting system. It is not enough to warn people to be ‘alert’ for all of the time, with elevated levels having little practical distinction.
The nature of resilience tasks can demand the ability to mobilise large numbers of personnel, and this could be delivered by a new approach to Britain’s military reserve forces. This case is put forward in ‘Resilient Reserves‘ written for the Commission by Gerhard Wheeler. Similarly, the creation of a civil reservist cadre (as per the Civil Defence Organisation of old) should be seriously considered (see Resilience First article), so that a list of volunteers with relevant experience could be maintained.
Between 1939 and1945, and until the mid-1960’s, local government civil defence organisations coordinated, and exercised, emergency rescue, housing, and food and other commodity distribution. They were, and remain, also responsible for the provision of social care and for working with local community, faith, and other voluntary organisations to support vulnerable citizens, including from increasingly diverse minority ethnic communities. Local public health teams are also established, and have statutory responsibility for, detecting and managing the response to infectious diseases. Centralising control of those activities, as happened during the early stages of the pandemic, is an understandable but inappropriate response to an emergency, whether foreseen or not.
An as yet unpublished report for DCDC by the RAND Europe Global Resilience Partnership, to which the Commission contributed, addressed the lessons to be learned from international comparators for the Defence Contribution to the Defence of the Homeland. The report developed a conceptual framework for ‘societal resilience’ around three overlapping phases of Prepare, Respond, and Recover.
It also made a number of recommendations to:
- improve civil-military coordination and integration, including more clearly defined roles and responsibilities;
- build more effective long-term relationships between Defence and national, regional, and local level organisations to support resilience planning;
- enhance communications at all levels to strengthen trust and understanding between the military, other government departments, civilian agencies, and the general public;
- exercise routinely in different configurations with various partners at local, national and multinational levels; and explore mechanisms of rapid and cross-sector mobilisation; and
- explore mechanisms of rapid mass and cross-sector mobilisation.
In the light of the pandemic, organisations are now more willing to invest in resilience, redundancy, and ‘just-in-case’ rather than ‘just-in-time’ responses, even at the expense of some efficiency. This is particularly true of supply chains.
But there will always be a balance to be struck between the cost of redundancy versus efficiency and profitability. Between the cost of greater resilience and the value of better preparedness. The emphasis has shifted away from efficiency as a result of the pandemic, but may slip back. The introduction in March 2021 of an Operational Resilience policy statement developed by the Financial Conduct Authority and the Prudential Regulation Authority, can be expected to put pressure on boardrooms to meet such obligations. This approach should be adopted in other sectors and is an issue that the Commission will be pursuing further.
There may be a case for introducing statutory obligations on boards to report annually on the level of resilience in the company. This will require some form of benchmarking and standards’ guidelines (while avoiding a box-ticking exercise).
There should also be a universally accepted way of calculating the Return on Investment (ROI) of preparedness, as shown in the diagram below.
The costs of any unwelcome event can be divided into ‘inevitable’ (I) and ‘avoidable’ (A). The cost of reducing an event’s impact can be reduced by investing in ‘preparedness’ (P). The ROI of P is therefore A/P. At its crudest level, so long as A>P, it is money well spent. Of course, the calculation is made more complex by at least two further primary factors, namely time value of money (TVM) and estimation of likelihood, both of which push the topic into the land of actuaries (rather than accountants). 
The insurance market could play a significant role in encouraging resilience through both carrot (reduced premiums for measures applied), and stick (no coverage without measures applied). For catastrophic risks, the expansion of Pool Re / Flood Re into a Catastrophic Re or Gov Re would be beneficial for organisations as an (government-backed) insurer of last resort. The Commission is in the process of discussing this further with relevant interested parties.
Resilience in an Interconnected World
The National Risk Register maps 38 major risks facing the country, including environmental hazards, major accidents, malicious attacks (cyber-based and terrorist), risks arising overseas, and – inevitably – animal and human diseases. However, a series of global trends are also likely to impact directly, or indirectly, on the UK in the coming years:
- First and foremost is climate change. This is likely to lead to more extreme weather events both at home and abroad (the last few months have shown plenty of examples of this on every continent). Floods, droughts, storms, heatwaves, and heavy rainfall will become more intense and more frequent. This will mean that some parts of the world will become increasingly uninhabitable, driving huge movements of refugees, and leading to shortages of food and water with an impact on global supply chains and producing political instability that will spill over national borders.
- Second, the world can expect increased competition for natural resources with greater supply insecurities.
- This is in the context of a changing world order and rapid geo-political change. As the US surrenders its pre-eminence, China becomes an increasingly dominant economic power, while Russia uses ‘hybrid’ means to maximise its influence, and the future of the European Union becomes less certain.
Earlier this year there was a power failure in Texas – an illustration of vulnerability in a modern highly industrialised nation – which highlighted the consequences of failure to invest adequately in the maintenance of critical infrastructure, the reliance on ever more complex and inter-connected and interdependent systems, and the threat of cascade collapse. This is a global problem and one – as in Texas – no one agency owns.
Some crises will arise suddenly and unexpectedly, requiring urgent action. Others will develop over decades. We need to be better prepared for whatever may occur.
As climate change increasingly takes centre stage, then international co-operation on resilience will be vital. A greater level of more effective global governance will be important to tackling the major systemic risks, when we (the world) are all in it together and at risk: this should take precedence over and above short-term national concerns.
The National Resilience Strategy is one of the most important strategies the government could develop in this time of a turbulence and change. If the plans outlined in the Integrated Review are translated into concrete actions, then the outcomes will make the UK more resilient over time, and better prepared, not just for one particular shock or stress, but for a panoply of risks. There are many actions and imperatives that are generic across a broad range of risks, and to concentrate on what that holistic approach may be will avoid being caught short by the unexpected.
The National Preparedness Commission looks forward to continuing to work with the Government on the formulation of this Strategy and supporting and developing the work necessary – as the Call for Evidence puts it – ‘to build a more resilient UK together’.
 TVM is a defined term which means that a pound in the pocket is worth more than the promise of a pound in a year’s time. The difference in value between the two is the discount which is used in a Discounted Cash Flow (DCF) calculations to make investment/spending decisions. It is a critical concept in managing preparedness spend as the complex relationship between current account, investment, likelihood and future return (not to mention the differences between capital and expenditure). These are the variables of which actuaries and insurers take note.