CEOs prioritizing ESG and supply chain risks

Pandemic year teaches CEOs the need for greater resilience in the face of unexpected threats

CEOs are now prioritizing resilience and risk management strategies

CEOs take a leading role in driving resilience, not only by setting the company’s culture, vision, and strategic goals, but often in assessing key risks.

According to a new study from ServiceNow and ESI ThoughtLab, which surveyed 1,080 executives across 13 countries, CEOs are personally engaging in monitoring and improving organizational resilience. Increasingly, CEOs see maintaining resilience as part of their primary responsibilities.

Environmental, social and governance (ESG) risk is becoming ever more important to companies as they experience disruption from climate change, geopolitical threats, and the ongoing COVID-19 pandemic. All the CEOs in our survey say they’re building a resilience-focused culture, and 90% say they’re focusing on ESG risk—with 45% taking the lead in assessing ESG risks.

Resilience takes center stage for CEOs

The past year was a crash course in how exogenous shocks can impact an entire organization. CEOs have been paying close attention. Every CEO who responded to the survey says they’re now working to build a resilience-focused culture. The vast majority are solidifying these efforts with financial incentives and other compensation to individuals and teams who contribute to organizational resilience.

Part of building a resilient company is recognizing the risk of disruptions. After a year of major upheavals, CEOs are on high alert for novel threats. Going forward, almost all CEOs polled expected to spend their time focused on mitigating ESG risks and coordinating across functions to react to the next crisis faster and smarter. They also see less value in outsourcing these capabilities to consultants than to other C-levels (20% vs. 33%).

CEOs work to shore up supply chains

The pandemic wreaked havoc on supply chains. As work sites were shut down and employees moved online, got sick, or had to care for family and friends, vendors and partners struggled to deliver products, goods, and services to market.

[Read also: How chip makers can ease supply shortages]

As a result, CEOs are turning their attention to strengthening their partnership and vendor ecosystems. Almost two-thirds of CEOs say building a more resilient ecosystem is a key step for driving value. However, the rest of the C-suite seem less convinced. Fewer than half of other C-level leaders are prioritizing their organization’s supply chain.

CEOs increasingly recognize how everything from cybercrime to natural disaster can undermine a supply chain—and how that can impact the organization itself. More than half are now setting up measures to assess and manage third-party risks.

Personnel challenges and complicated systems plague CEOs

CEOs see challenges ahead when it comes to resilience and risk management. Like other C-levels, they believe uncertain ROI from resilience-focused programs and investments might be an obstacle to resilience-first programs and investments. Even when the ROI seems clear, a lack of relevant metrics can make it difficult for CEOs to get the rest of the company on board with key initiatives. This may change as more companies count the direct and indirect cost of disruptions to themselves, their supply chains, and their industry peers.

CEOs highlight two additional challenges that worry their peers less. First, they’re concerned that their organization lacks the personnel, talent, and skill needed to drive resilience. In light of the so-called Great Resignation that’s sweeping across the U.S., this is likely to become even more of an issue.

Second, CEOs worry that the systems undergirding resilience are too complicated to implement. They require too much time and effort to configure, undermining potential benefits the organization could derive from them. One of their specific concerns is the lack of an integrated dashboard that can provide CEOs with an at-a-glance look at the company’s health.

However, CEOs are seeing benefits from resilience, too. Already, workplace initiatives are yielding improvements in health and safety. CEOs also believe that building a more resilient organization is cutting down on costs while boosting revenue.