Things do go wrong in business. Sometimes because of our failures to have done some things right. Other times disasters are caused out of our control, such as by mother nature. Depending on the gravity of the incident, our business might suffer only mildly or hurt deeply. Unplanned disruptions of operations are the areas of interest of Business Continuity Management, which is our subject today.
In running a start-up factory with limited resources several years ago, we often had to get raw materials on credit from our suppliers. One of the major raw materials was palm oil. On a particular day, we were able to get some one hundred and twenty thousand litres of the oil on credit. We were very happy. The oil was stored in a cylindrical tank of several meters diametre that, for all intent and purposes, seemed physically stable on its feet that were hardly one foot each above the ground.
But early the following morning, I got a call from the factory about a major incident. I drove there at once to find our oil completely spilled out on the ground. Unrecoverable. In less than twelve hours we had moved from having key stock that was to last us a few weeks to absolutely none of it. Our production had to shut down, in addition to that we had an environmental clean-up challenge and a supplier to pay!
Businesses are vulnerable to catastrophes such as accidental damages, wilful damages and natural disasters. Other times it is disasters at, say our supply chain partner, that may impact negatively on our own operations. Disasters range in timing, magnitude, and impact. It may be a loss of laptop with all your business contacts, communication, and information. It may be a farm that is completely submerged in flood. It could be loss of key staff, documents, or millions of litres of oil spillage by a major oil company.
All sorts of errors, accidents and disasters do happen in business. Regardless of size, scope and operations, the budding entrepreneur should learn and adopt wise business continuity management practices to be able to handle unwanted disruptions as they arise with minimal negative consequences to the operations and reputation of the business.
What is Business Continuity Management? Business Continuity Management (‘BCM’) is the planning and preparation required to ensure that the likely occurrence of unwanted events is minimised and that a business maintains its functions or is able to quickly recover after unplanned disruption has occurred. It is a framework for identifying an organisation’s exposure to internal and external threats and developing wise responses. The objective of BCM is to provide an organisation with the capacity to respond swiftly, deliberately and effectively to threats.
The benefits of BCM include:
• It mentally prepares operators on the likelihood of different disaster-types as well as exactly what should be done in the event of any disaster happening.
• Knowing what to do in advance of unwanted incident empowers operators and makes it possible for them to recover business operations quickly after disruptions.
• Mitigating risks strengthens an organisation and reduces actual costs of recovery in comparison to if there was no BCM framework in place.
• Effective BCM measures saves limbs, lives, and money in the long run.
• Puts the organisation in compliance of regulatory requirements with positive consequences of eliminated costs of litigations and claims.
• Earns business the confidence of host communities, customers, and other stakeholders.
Business Continuity Planning: Specifically, Business Continuity Planning (‘BCP’) refers to the process of developing a system of identifying, eliminating and/or managing risks of disasters as well as handling actual occurrence of disasters. A business continuity plan is a document developed to achieve the identified objectives of business continuity planning. It outlines how a business will manage and continue operations at the onset, during and after unplanned disruptions of operations.
There are three major components of BCP viz: Risk Assessment, Disaster Recovery and Restoration (‘DRR’) and Test, Approval, and Implementation (‘TAI’) of the BCP.
Risks Identification and Assessment (‘RIA’): The first thing to do is to identify specific company and sectoral risks as well as general business risks. Establish how each risk may affect different areas of your operations as would have been outlined below.
Identifying Critical Assets and Business Functions: This is an impact analysis and management activity. It involves identifying critical business functions that must be maintained in a continuity situation in order to sustain operations and/or be in compliance with legal and moral requirements on safety of lives and discharging contractual obligations. It also involves identifying critical assets and how they may be affected by different risks identified. How do you protect different assets and aspects of operations to different disruptions?
Other aspects of the planning that must be thought out include:
• Internal and External Communication Procedures: Communication with colleagues, customers, suppliers, regulators, etc., are very key in difficult times. You should have a contacts’ list and a clear channel of communication with different parties so as to be able to take appropriate actions to minimise damage from unplanned disruptions.
• Alternate Supply Sources and Production: Two critical business functions that suffer in many a continuity situation are supply chain and production capacities. Do you have buffer stock of raw materials and supplies that can keep you in safe production if an unplanned disruptive event takes place? Do you have alternate suppliers that can deliver raw materials to you if your major supplier is in a continuity situation themselves and unable to meet your orders?
We have introduced the concept of Business Continuity Management, its benefits, as well as Business Continuity Planning and its components. Next week, we will take up other components of BCP as well as Disaster Recovery and Restoration and Test, Approval, and Implementation.
