Resilience: From cost to value

Resilience is an important area of focus for all government departments. Since the last Spending Review in 2021, the country has grappled with the impact of the Covid-19 pandemic, cost-of-living pressures including rapidly increased energy prices, escalating tensions abroad and at home, and cyber-attacks on critical national infrastructure. The launch of the UK Resilience Framework in 2022 enabled a shared understanding of risk across the multiple partners involved in mitigation measures, a focus on building whole of society resilience, and a shift to prevention rather than cure. The upcoming Spending Reviews present an opportunity to build on this and enhance investment in national resilience and economic security.

However, the continual challenge with building resilience is that it typically requires upfront investment to prevent or mitigate uncertain events that might not happen within short term political cycles. This makes it hard to communicate the benefits of investing in resilience, and justify why it should be prioritised over traditional investment proposals that often have a clearer return.

To better recognise departments’ contributions to preventing priority risks (as described in the National Risk Register), the government could incorporate resilience explicitly into the Spending Review process. At the next Spending Review, however, departments will need to demonstrate value for money in traditional ways. Drawing on HM Treasury’s Green Book guidance and our experience working across national resilience, four practical strategies can help departments to make a compelling case for investing in resilience:

1. Highlight the role of resilience in delivering government ‘missions’

While references to how investment mitigates risks on the National Risk Register are helpful, real-world examples of how proposals can achieve the government’s key missions moves resilience from a defensive cost to a growth enabler. For example, preventing hospital IT outages and cyber-attacks links to the government’s mission to ‘build an NHS fit for the future’. Recording tangible impacts such as the number of GP appointments lost and operations cancelled brings the potential risks to life. It also shows decision-makers that key policy commitments are fundamentally reliant on resilient systems.

Often there are second-order links to the government’s missions that may not be immediately apparent. Systems modelling and analysis, for example, is an effective way to uncover new dependencies where targeted investment to improve resilience could deliver the best value.

2. Capture the cost of inaction

The economic case for investments should clearly articulate the ‘do nothing’ option, explained in people-centred terms and quantifying the realistic costs of failing to intervene. Without investment in resilience, the potential impacts include financial losses, reduced productivity, increased recovery costs to return to business as usual (BAU), operational costs associated with emergency responses, reputational costs and loss of public trust. Additional social costs include loss of homes, livelihoods, and even lives.

Resilience investment tends to be highly bespoke and new research to properly capture the cost of crises is often needed to overcome long-standing evidence gaps. For example, the Home Office recently published their revised assessment of the economic and social analysis into the cost of fire. This identified 17 different impacts that together enabled them to estimate the average cost of a fire is £78,000. The Home Office is now better able to justify the value of investing in fire resilience measures.

3. The six dividends of resilience

When monetising the benefits from investing in resilience, our experienced highlights that six dividends of resilience capture the value of investing in risk reduction measures, both if the incident occurs but, crucially, also the increased value provided even if it doesn’t. Within both of these categories, we have found three types of intervention yield potential value for organisations:

• Risk prevention and mitigation: This is a traditional measure of resilience, however our model also recognises that this investment creates jobs and enables growth via increased market confidence for private investors – even during BAU.
• Reduction in chronic stresses: Stress factors exacerbate losses during shock events and can become shocks themselves. Tackling chronic stresses as part of improving resilience leads to tangible social and economic value, such as reduced deprivation, improved social mobility, and better health and wellbeing. All of this improves the ability to weather shocks such as pandemics.
• Increased adaptive capacity: This captures the potential of people, processes, assets, and technologies to adapt to change. Adaptive capacity offers value when responding to risks and during BAU through integration people and organisations, encouraging learning and innovation.

If the six dividends are fully quantified, the long-term benefits from preventing a disruptive event often far outweigh the investment required to build and maintain resilient systems. For example, investing in green flood defences mitigates the risk of flooding but also creates jobs, attracts additional private investment, and brings health and community benefits associated with more green spaces. The benefits can be readily quantified; preventing economic damage and associated harms, boosting local economic activity in construction, reducing chronic stresses, and improving the flexibility of the broader community.

4. Build a suite of metrics for resilience value

The complexity of resilience means that a benefit-cost calculation should not attempt to reduce resilience to a single monetised metric. Instead, focus on the broader value narrative by developing dashboards that bring together a range of quantitative and qualitative indicators. These metrics can include a diverse range of factors such as the number of people potentially affected by a risk, wellbeing indexes (both for customers and employees), number of key response assets or people trained, and a quantified estimate for the overall value that is potentially at risk. Modelling tools such as macro-models, risk models, and environmental models can provide valuable insights, but these should be applied selectively and proportionally.

For example, in our recent work with the UK’s higher education ecosystem, we used our Systems Resilience Approach to map their ecosystem, capture interdependencies, quantify value, and understand criticalities – providing a shared understanding of whole system value and risk. The insights gained from this exercise can now be used to target proactive interventions and build the business case for investment in resilience initiatives in the higher education sector.

Ultimately, by capturing the full spectrum of benefits from resilience and the costs of failing to act, public sector organisations can make more compelling cases for the investments needed to underpin the nation’s long-term economic security and growth.