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What New Zealand's Cyclone Gabrielle Can Teach Us About Business Continuity Risk

It will never happen to our business! In New Zealand, we recently experienced several large-scale storms over summer, while just over a decade ago, one of our larger cities, Christchurch, was devastated by an earthquake destroying many buildings.

Extreme events like these are difficult to fully anticipate or prepare for. However, conducting "what-if" exercises with your team can help your organisation to consider a wide range of events that could impact your ability to navigate events outside the norm. Your business continuity risk plan might involve establishing a branch of your business in another region to reduce risk.

So, what is business continuity risk?

Business continuity risk (BCR) is an area of understanding, planning and readiness all businesses should make room for. Not doing so is a risk itself!

BCR is the risk your business faces if it were unable to trade and carry on business, should a range of adverse events happen. A BCR plan is a document the business uses to manage this trading risk.

Most businesses take on a range of insurances to reimburse them, should some adverse event occur. However, those insurances may not include a pay-out for all eventualities, nor might they be enough to protect the intangible losses like brand damage or the capital loss if trading was paused. Most insurances are like an ambulance at the bottom of the cliff. BCR plans will include in them some mix of insurance policies for adverse events. However, the value in a business continuity plan is how your business thinks about a whole range of adverse events and their impact on your normal trading. Prevention is better than a cure. Building preventative elements into your business plan and being able to enact them easily, if required, or taking proactive measures before the possibility of an event occurring, is the essence of managing your BCR.

The New Zealand government has some helpful information for organisations to gain awareness of continuity risk planning. This is a good place to start: Continuity and contingency planning

Prior to my Founder/CEO role at Tidy, my career had long focussed on the assessment, by way of mathematical-computer modelling, the business risks for others. This allowed risk reduction solutions to be put in place. The key is to initially brainstorm and then model all potential adverse events which may contribute to the demise of some or all aspects of an organisation's operations and trading success. Although doing nothing may be the chosen outcome in certain situations, it is still important to have considered the reasons why, and the likely impact on your trading. Additionally, it is crucial to evaluate the probability of this outcome relative to other more likely negative events.

While no business can provide for every possible scenario, nor afford preventive measures for each, you can consider them and create a clear plan. This plan should state a situation has been considered and explain the rationale for placing preventive actions on an Eisenhower Matix (high to low importance on one axis and urgent to low priority on the other). The date of your BCR plan is a reminder it's wise to periodically review your plan and consider changes based on shifts in business circumstances and the environment in which you operate.

BCR is not confined to risk created by your own company and should look at adverse factors beyond your control that would affect your business operations. For example, weather or other environmental events. It's impossible to account for every possible event or know its impact for certain. However, involving as many individuals in your organisation as possible to create a BCR plan and taking proactive steps to prepare and respond to potential disruptions, can improve the plan over time.

Other likely factors are supplier impacts. It's important to ensure contingency plans are in place in the event of a supplier going out of business or if a supplier is an importer with only one source of supply. Understanding the upstream source could be vital, especially if your business is very dependent on the product. A thorough BCR plan will also look at adverse events that could affect your customers as this could impact their ability to meet their contractual obligations to your business. So too should trends and fluctuations to the market economic risks your business is exposed to be assessed; energy costs, interest and FX rates, etc.

This article intended to introduce the topic of risk planning within your business and encourage the development of a culture recognising potential risks that could disrupt normal operations. It's important to have prepared actions in place to keep your business working in the event of such disruptions. The more unlikely the event the easier it is to imagine they will never happen, but a BCR plan should deal with a range of events from more common to the unlikely. Ultimately, the culture you establish around BCR is what matters most.

Published Date:

March 3, 2023

Read Time:

5 minutes


Team Tidy