Companies need to be more proactive in their attitude to crises, says Andrew Holt
Companies do not take business continuity seriously enough. That is the stark warning from Marsh when it comes to companies adopting business continuity management (BCM) strategies to deal with a catastrophe or crisis.
The range of uncertainty and lack of cohesion in dealing with a crisis is detailed in a survey of 1,000 companies by Marsh, and must be a cause for concern for not only insurers, but the industry as a whole.
Marsh revealed that two-thirds of companies surveyed have not implemented an effective BCM plan.
Highlighting the reactive approach to business continuity, Martin Caddick, head of Marsh's risk consulting practice, says:
"The lesson is that companies only take business continuity management seriously when they have been burned."
Half of businesses are unable to identify any critical business processes or show any knowledge of the importance of these processes to their organisation. In short, they don't understand what is and what isn't important on the BCM agenda.
Caddick says: "Businesses have really some way to go. Dealing with business continuity is seen a necessary evil, but businesses need to take it more seriously."
The role of staff, at all levels, is a major problem in a crisis. 69% of respondents felt staff would not know their role in the event of a major crisis. Even more worryingly, 39% of senior mangers believe they are not trained enough to deal with a crisis at all.
"It is clear that the procedures and the required information are not in place to deal with a crisis effectively.
"Given that the average chief executive tenure is around 10 years and during that time they will face at least one major crisis this is an area that organisations cannot afford to ignore," says Caddick.
However, the paradox is that 52% of companies surveyed said they could cope in a crisis. "Naturally this is a good thing," says Caddick.
"But then when you look at the figures overall, two thirds say they have plans in place, but only a third would know how to use those plans. 69% said their staff would not know what to do in a crisis, which is not reassuring as it means only 31% would be capable of dealing with a crisis. So there are many questions here for companies to look at in regards to their BCM," Caddick continues.
"All aspects of the organisation should be considered from suppliers to head office, from production through to customers."
Even where there appears to be good news, it soon turns negative. Where BCM plans do exist, these are seldom tested annually.
"You have to test things regularly to make sure they work. After all, these are serious business processes you are supposed to be protecting," says Caddick. Of those who do test procedures, less than 40% use third-party auditors.
A BCM plan can be advantageous for efficiency and cost reasons, but for Caddick, it is more that that.
He says: "Business continuity is all about reputation. A badly managed crisis can mean that a reputation is ruined overnight. And when continuity works well, the reputation of that business is enhanced."
One of the big problems British companies suffer from is having an against-the-odds mentality with half of respondents being confident they can muddle through in a crisis.
"We have this Blitz mentality, where we admire the shop owner trustily standing by the ruins that were once his shop," says Caddick.
The key is to make sure that the shop does not become ruins in the first place. And Malcolm Cornish, Marsh risk consulting practice's business development manager, says that in a crisis the industry can work collectively, but to happen this needs a catastrophic event.
"In a crisis such as Buncefield," says Cornish, "competitors within the market helped each other out. We have something of a Dunkirk spirit emerging in these situations. What we need is that approach and spirit before an event occurs.
"Organisations spend years building their brands, but a single event could wipe out this investment."
It is time the industry acted before a crisis hits. Because then it can be too late. IT