By Kwon Woo-chul

“A large global organization will typically have to invoke its business continuity or crisis response plans somewhere in the world once per week on average and every week throughout the year.”

Global risks such as terrorism, pandemic flu and climate change are providing new and significant challenges to an organization’s survival. Recent non-physical events, such as information leakage, financial crisis, and rogue trader add to the challenges.
The result is that leading organizations are now actively planning their response to events, which were previously considered to be very low probability.

The seemingly increasing likelihood of these threats mean that a major incident or crisis could be just around the corner for any company, regardless of the industry in which they operate or the business practices with which they are involved.

Failure to be properly prepared to respond to these increased threats could severely impact both individual companies and industry sectors. Interdependencies in supply chains and the increased requirement for crisis situations to be managed as part of a coordinated effort with customers, regulators, infrastructure providers and civil authorities prevent a significant challenge.

Proactive crisis planning has become a core requirement of any effective business continuity program. In a crisis, it is crucial for companies to be able to communicate effectively with employees and their families, business partners and customers in a timely manner.

A strategic response also needs to be quickly implemented to protect value and reputation. Being prepared requires the regular practice of formal coordination, communication and decision making procedures.

The pressures on delivering customer and service excellence are greater than ever and the changing nature of potential threats has highlighted the need to protect reputation through proactive management. Reputation takes years to build but in a crisis can be destroyed in a moment.

A study by the Oxford Metrica illustrated that an incident which is not well handled will destroy shareholder value. The research tracked the effect on share value of a number of organizations that had experienced a catastrophe and concluded that in the 10 day period following the crisis, share value of any organization impacted was negatively affected.

However, the research clearly showed that effective responders quickly regained and often enhanced their shareholder value — typically up to 15 percent — while ineffective responders suffered a long-term loss of 15 percent.
Effective crisis management requires simplicity, flexibility and the ability to be proactive and make decisions early even when the desired information is not available.

Enterprise should be better prepared by ensuring that the right leadership team is established, comprising functional representation from people who know the business well and will be able to steer the company through the crisis.

Also companies should develop, command and control systems, notification and escalation procedures, which integrate internal teams. Linkages will also be provided to other key stakeholders, such as the emergency services, outsourced providers and critical suppliers.

Organizations should understand and manage threats to the organizations and prepare threat-specific plans, develop procedures that address the human aspects of a crisis and communications plans for your key stakeholder groups.

Finally be sure that only rigorous testing and exercising programs can enable the crisis team to practice their response roles and to test plans, procedures and facilities more effectively and efficiently.

Global businesses will typically have to deal with up to two or three natural disasters every year, which creates a wider impact and longer-term consequences.

A robust capability to handle crisis conditions will help steer the company back to a position, which is as close as possible, or better than the one that existed prior to the event.