Tuesday, 18 March 2014

Counting the costs and benefits of business continuity, the BCI Technical Director's perspective

For those of you who think BCM is expensive, try operating without it.

Business Continuity has often been treated almost as an ‘act of faith’. Common sense has suggested that well prepared companies are likely to recover from an unexpected interruption quicker than unprepared ones; that they are likely to lose much less money by being productive again more quickly.

In times of financial restraint, with organizations looking to squeeze costs wherever possible this position is hard to defend, in some cases it simply no longer works. It is not too difficult to find out how much is directly lost as a result of disruptive incidents; in fact our friends from the insurance world have facts and figures about all types of incident – the amounts claimed, the amounts paid out and the actuarial data that supports the likelihood of every type of known problem.

This does however, leave difficulties for the BCM practitioner. Given the increasing attention paid to ‘black swans’, ‘unknown-unknowns’ or generally unpredictable events (illustrated again by the Malaysian aircraft disappearance), conventional risk pricing that requires forecasting both probability and loss expectancy is meaningless. For BCM people, how can we hope to quantify the potential loss connected to brand and reputation damage, market-share loss, share value collapse and more aggressive targeting by competitors?

Even if we can argue successfully (without detailed facts and figures) that we need to protect ourselves from the potentially terminal consequences of unexpected incidents, can we make a strong enough case for BCM as the solution? It is one thing to point out a problem, it is an entirely different thing to show you have the answer. For many years the BCI and other similar bodies have conducted regular surveys that demonstrate that the cost of business disruptions is significant. This has increased in line with trends such as ‘JIT’ manufacturing, complex and extended supply chains, increased off-shoring of services and purely cost driven out-sourcing of operations.

A soon to be released global survey indicates that almost 30% of respondents have experienced business losses of over $5 million as a result of a disruptive incident. This was up from less than 20% three years ago. The challenge for BCM professionals is not so much to shout about those facts (although that approach can help sometimes) but to show why Business Continuity can help both reduce the likelihood of suffering that loss at all, but if it should happen that the loss can be dramatically mitigated.

The wider dialogue taking place about resiliency throughout industry and government actually helps our case. In some ways recovery is simply a failure to be resilient, although total protection from everything is clearly impossible. The need to balance measures that make us inherently more able to withstand rapid changes in risk (political, environment, social and technological) with our ability to adopt and response as needed is the future for BCM thinking. What value do you put on success and what cost do you put on failure? Does effective BCM make the former a more likely outcome than the latter? The answer to those questions provide the justification for Business Continuity – in my view it is a modest investment for corporate decision takers who understand the real questions.

By Lyndon Bird
Technical Director at the Business Continuity Institute

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