Cost-related Resilience Strategy

Description

Module 4: November 5, 2021
Cost-related Resilience Strategy
Instructor: Dr. Teresa Harrison, Drexel University

This module will delve deeply into the nature of costs and how they may be structured to accommodate risk and resilience in a crisis or to prevent a crisis from occurring. A basic distinction will be made between fixed costs, which do not vary with the level of output, and variable costs, which do. One set of resilience strategies consists of converting the former to the latter. For example, organizations can rent rather than buy their physical space and capital equipment and they can reduce their permanent staff in favor of contract workers. Also relevant is the concept of joint costs, i.e. costs shared by two or more program activities. The ability to shift the burden of joint costs among programs with different revenue possibilities, is another potential element of resilience strategy. In addition, understanding the relationship between variable costs and revenues is a key determinant of when an organization is better off shutting down versus maintaining operations in a crisis. Finally, the potential for an organization to exploit economies of scale and scope by developing contingency plans for organizational expansion and collaborating, merging or consolidating with other organizations.