The objective of Business Continuity Planning is to identify and map out strategies that will enable a company to maintain its essential services and continue operations in the event of an emergency that could otherwise prevent or seriously curtail business from being conducted. Our Guest Speaker said it best - it is an opportunity "to plan for the future to prepare for the unknown"!
Last fall, Food Sector Members gathered to learn more about the general concept of Risk Management and as a follow-up to that session, this spring we elected to focus specifically on Business Continuity Planning.
As such, we were delighted to have Z. Linda Papadopoulos, Corporate Insurance & Risk Manager of Pearson Dunn Insurance Inc. join us to put a framework around what Business Continuity Planning is and how Business Interruption Insurance can be used as a risk finance tool to mitigate downtime and increased costs when a loss is incurred. BCP actually started as a formal process after Y2K. Planning itself takes into account absenteeism, the unavailability of supplies, services or materials, interruption of transportation, communication or power. The objective of BCP is to maintain essential services in the light of an emergency.
What are essential services?
* When not delivered, creates an impact on the Health and Safety of individuals
* Leads to the failure of a business unit if activities are not performed in a specified time period
* Satisfies regulation requirements
Linda shared a definition from the British Standards Institute which suggests that Business Continuity Planning is a "holistic management approach that identifies potential impacts that threaten an organization and provides a framework for building resilience and the capability for an effective response that safeguards the interests of key stakeholders, reputation, brand and value-creating activities." (A good example of this is from the Chapman's Ice Cream plant fire - Chapman's indicated that their very first priority was to look after their employees. An organization has to start by setting their priorities and for most, safety is the highest.)
The "quiet catastrophes" of Business Continuity Planning are elements such as branding, public image, assets... there are several examples of this, especially when considering the impact of recalls perhaps most notably would be Maple Leaf's.
"Adverse conditions" are those that impact the organization in a significant way through man-made or natural conditions and could include things like fire, floods, earthquakes, pandemics, supply chain interruption, damage to major production equipment, power outage, loss of computer network infrastructure, food contamination, etc.
Building a Continuity Plan:
* Establishing a "Roadmap"
* Formalizing a process
* Ever evolving
* Focus on Continuity not Crisis
Adding to the significance of creating and maintaining a BCP, Linda provided some rather eye-opening statistics. Interestingly, one out of four companies do not have a plan. And, if they do have a plan, six out of ten companies never review it. Unfortunately, if these companies without a plan or without an updated plan are not back in business within five days of an emergency, 90% of them will fail within a year. Our Speaker suggested then that preparing a plan is a must.
Enhancing our discussion on plan preparation, was the importance of making sure it was shared and understood. We also recognized the critical role communication takes and that developing relationships beyond the plant level is also key. Stakeholders, as an example, should sit down with Members from the Municipality for key services to see how fast they can respond and replace services - the local Fire Department should be engaged as well. Have them visit your facility so that they can understand your equipment and processes and how to respond accordingly in the light of an emergency.
Linda reviewed the benefits of planning and then the significant risks a company may be utilizing their plans to respond to:
Benefits of Business Continuity Planning:
* People (ensuring protection and safety - this should be the primary concern)
* Protecting property and assets
* Preserving profitability (market share/production)
* Protecting reputation (quiet catastrophes are more common than man-made)
* Enhancing business value and competitive edge
* Compliance with legal regulations
* Mitigating corporate liability
* Optimizing insurance protection and costs (they are very receptive to having companies with Business Continuity Planning)
* Key staff (food poisoning/epidemic/injury/natural disaster)
* Denial of access (fire/flood/terrorism/neighbour's problems)
* Loss of power/data/telecommunication/key equipment/machinery/transportation/warehouse/distribution/reputation
* Denial of access could also lead to suing by other manufacturers/residential/air pollution
Business Continuity Planning Lifecycle: Essentially begins with putting a plan in place to address those issues that could impact our business as above and then testing and maintaining it on an ongoing basis:
- Can you stand "x" amount of days being shut down?
- How long will the impact last?
- What is the financial impact?
- Set goals for 24 hours, 48 hours, one week after a crisis (one company developed a timeline) - your plan should mirror this
- What would happen with a widespread power outage (ie. freezers)
- AMEX bomb threat involved renting a warehouse after that and storing their services offsight - this happened seven years prior to 911 and as a result - they were fully prepared when that crisis occurred
Testing and Acceptance
- The Testing and Acceptance piece is the part that makes you continue operations vs. being stopped
- Utilize your insurance protection and providers to test your plan
- Seek input from your Stakeholders
As you move forward from a maintenance standpoint - look at the role Business Continuity Planning takes - and how they meet your organizational goals when you are:
* Purchasing new equipment
* Outsourcing to new suppliers
* Implementing a new production line
Developing the plan and understanding the benefits of doing so aptly led into discussion and conversation around Business Interruption Insurance.
* Consideration of potential revenue losses, additional expenses, intangible losses
* How to plan for the worst case scenario to figure out what a company's maximum downtime might be
* Proper analysis will indicate if a company needs to purchase insurance or have the resources internally
Business Income Worksheet:
* Consider new contracts that loss could influence and are there covenants in contracts that require you to sustain your supply of material (ie. penalties, terminations, etc.)
* Expenses (ie. AMEX warehouse)
* Business Plan has to mirror strategic plan and goals for the organization
* Plan needs to be flexible to changing goals of the organization
* Employment contracts (ie. union contracts may have wording that say workers need to be paid for "x" number of days)
As roundtable discussion on Business Continuity Planning opened up, some final suggestions and thoughts from our presenter and guests included:
* Develop a "Critical Business Chart" - assign owner's to the risk; look at it twice a year or when significant changes occur and it will allow you to see if your plan is still valid.
* Risk Assessment - conduct a table top or brainstorming exercise - take your top 40 items and then narrow to 20 and prioritize - look at potential solutions and ideas from there (ie. sprinklers do not lessen a fire but minimizes the impact)
* Damage/people/environment - training should be essential for reacting before a crisis becomes more heightened (ie. after welding - need a security guard 20-40 minutes after welding takes place because that is usually when the fire happens) - build in tolerances
* Exercises quantifies what happens after a major loss
* If you have the ability to outsource - people working out of homes - advertising
* R&D portion often overlooked
* Get people engaged in the process - acceptance will help put things in place
Risk management is where you start and insurance is just one portion to help address those needs. Insurance companies have resources available to help you. The objective is to help reduce costs on crisis' - therefore, engage them in your processes.
And, a final reminder, you can put all the risk controls in place but you cannot predict the outcomes - but if you a plan to help navigate through some of those "rough waters" that should help your business recover that much more successfully.
If you have any questions, please feel free to touch base with our Guest Speaker Z. Linda Papadopolous at firstname.lastname@example.org anytime, she would be happy to speak with you. A copy of her presentation is attached to this Event Summary as well. For more information about Risk Management, you can download our flyer.
Have a great day and good luck with developing your Business Continuity Plan!