Would your business survive flood?

The beginning of 2011 has seen the raw power of nature on full display in Australia.  Every day we have seen in the media pictures of flash floods, rivers breaking their banks, dams filled to double their capacity and having to release water into flooded rivers and sodden cities, monsoon-like rainfalls that are breaking all records.  The cause of much of this, according to the weather people, was La Niña – now it is the tropical monsoon season.  The consequence has been the death of too many of our fellow Australians, the destruction of so many homes, the loss of all personal possessions, the washing away of bridges and roads, the loss of power supply and fresh water, the closure of ports and industrial shut-down in the affected areas.  For the nation, the cost will be many billions in support payments, cleaning up, repairing infrastructure and the long slow process of rebuilding residential and commercial life in the affected areas.  The impact may be as high as 1% of GDP^[1].

What is the scope of your BIA?
The business impact analysis (BIA) is the fundamental tool of crisis management and business continuity planning.  In it we draw together all the possible sources of risk and look at the direct and consequential impact of those events when they come to pass.  The purpose is to build a hierarchy so that we know the events that will have the most damaging impact on the business - and which are the key ones to getting it going again.  A common failing of this part of the process is for managers to go into denial –   “it won’t happen to us”.  The people of Toowoomba thought that – sitting 125 kilometres inland, 700 metres above sea level and with no rivers running through it.  And look what happened!  So, some questions:

·Did you start with a blank sheet of paper?
·Did you implicitly or unwittingly restrict the processes?   If you insisted that your focus must always be profit and downward cost pressure, you unavoidably limit your company’s approach to crisis management and business continuity planning?
·Would your plan enable you to bring your business back into operation or continue to service your customer network, if you had a significant site in Brisbane or Ipswich in January 2011?
·Would you take a factory or institution’s location on a flood-plain into consideration, if it was assessed to be a 50 year risk?

If you think they are tough questions, even bordering on the extreme, then reflect what your responses would be if you were the responsible manager and had to appear at a coronial inquest! 

The unexpected is what it is all about
Did we expect the SARS epidemic, oil spills in the Gulf of Mexico, earthquakes, bridges being knocked out by shipping accidents, bushfires on the scale of Ash Wednesday or Black Saturday or flooding on the scale that has hit Queensland, northern New South Wales, north-western Western Australia, Victoria and Tasmania in 2011?  Do we expect fraud, product tampering, recalls, unauthorised release of email traffic and accounts, workplace bullying, cartel activity and damage to our brand?

These are but a few examples that events that you know can happen.  If you don’t have a plan that enables you rapidly to respond and deal with all the consequences: media, customers, government inquiries, environmental agency inquiries, shareholders, investors, litigation and workforce unrest, then you may be left in a situation where your lips are moving but no sound is coming out – not a good look!

Planning is the basis of survival
The end of year or start of year is always a good time for managers to review the settings of their business: strategic direction; operational priorities for the next six months; targets; training and development emphases; and the readiness of the business to withstand shocks.  Looking at what has happened to so many of their colleagues in Queensland and northern Victoria is a prompt to dust off the Crisis Management Plan and the Business Continuity Plan and have a long hard look at the assumptions made.  In particular, look at the BIA and review the sources of risk that were put in the possible/probable category.

The striking feature of the recent floods, particularly in Queensland, was the speed with which they impacted communities.   No business can afford to ignore a crisis and many a manager will not survive a crisis because they failed to envisage, to plan and to practise.  When a crisis hits, a well-developed plan will likely be the difference between making correct decisions in a context the manager has thought about and thought through – as opposed to having to make decisions on the run, when bad news is overwhelming.

To protect your business from shock takes time, effort and money.  Developing your plans, exercising them against scenarios and reviewing their adequacy take time.  But if you, your management team and your board cannot find a place for this activity among your operational priorities for the year, then you should realign your priorities as it is a critical issue. Insurance cover will meet a range of contingencies, but if the last few weeks have shown us anything, it is that insurance cover only takes you part of the way.

Without survival, there is no business!
What steps are necessary, therefore, to better shock-proof your business?

§ The management team and the board, if you have one, have to be completely committed.  This is where you need leadership, drive, ownership and support from the top.  If it is a priority for this group, then it is automatically a priority for all divisional/departmental managers;
§ Undertake a root and branch BIA – if it is unlikely to be absolutely thorough or you don’t have the people to do it, then have SNP assist you in the process;
§ Develop a plan that addresses and prioritises all your real risks and lays out the response guide;
§ Undertake exercises to practise the plan; review them and refine your plan; then exercise again – all the key players and their alternates or second alternates have to be comfortable to step up to the plate;
§ Make sure your customers and clients know you take this seriously – and you are prepared.  This will be a selling point for your ‘brand’. 

[1] According to Prof Warwick McKibbon, Professor of International Economics at the ANU and member of the board of the Reserve Bank, as reported in The Age 12 January 2011.