Business Disruption

No one likes to spend time thinking about or planning for a disaster to happen. This is especially true in the business world, where little effort is spent on “cost only” projects.

Although many large corporations have elaborate disaster recovery plans in effect, they generally center around the corporate computer systems and information recovery. Very few have established a method to provide recovery for their business as a whole.

Pathfinders recently assisted a boutique hotel in developing an emergency action plan to be executed in the event of a possible natural disaster, such as an earthquake, or flood. The City is an island, the City government has evacuation plans in effect should such a situation arise, but very few hotels have planned for this kind of disaster. Most have a simple “to do” list, which assigns duties to each executive.

Such one-disaster planning is myopic to say the least. A business today must be prepared for any event that may disrupt or shut down its operations. The actual event itself cannot be predicted, but a plan to resume operations as soon as possible afterward is absolutely necessary.

This is known as Business Continuity Planning.

You also have to think of following eventualities for business continuity.

  • Departure of the Leader or key personnel
  • Losing key customers to your competitiors
  • Losing key supplies due to business closure of your vendor
  • New regulations on imports of your key raw materials – either prohibitted or imposing heavy duties
  • Non-availability of critical spare parts from your machinery vendor
  • Labor dispute leading to strike
  • Environmental issues – very likely played by NGOs in your country

From our experience, very few small to medium sized businesses are prepared for a business disruption. They simply do not consider the necessary expense to be worthwhile. Recent estimates are that a manufacturing facility can withstand a disruption of only three to five days if it has any chance of resuming business.

Last year, we met an executive who owned a successful manufacturing and distribution facility. His closest neighbor was a half mile away, so he felt relatively secure from all but the “biblical” disasters, such as flood, earthquake, etc.

One day a careless worker dropped a cigarette butt in the paper towel disposal, and a small fire ensued. Alert employees actually snuffed the flames before the fire company arrived, limiting damage only to the rest room.

Unfortunately, the fire destroyed the older lighting ballasts, and the PCB’s they contained spread through the ventilation system to contaminate the entire facility. The business was quarantined until cleanup was completed and approved.

After ten days, the plant was closed, and 110 people lost their jobs.

As you can see, disasters are not limited to the computer room.

You must develop a plan to resume normal operations, even to the departmental level. This must include a way to accept orders, buy material, assemble and ship product even on a limited basis. If you don’t stay in business, you will be out of business very quickly.

 

Suresh Shah, Pathfinders Enterprise

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