What is the future of business continuity?
Expert Interview with Jacob Taarup Esbensen, PhD
Business continuity is moving to the forefront of strategic planning. This is primarily due to the more extreme weather changes, geopolitical environment, and the growing interdependencies businesses have across international borders.
In our expert interview with Jacob Taarup Esbensen PhD, a Krizo risk advisor, we had a chance to discuss where business continuity is heading and what that means for most organizations.
“Business continuity will play a bigger role. Especially driven by climate change events. We already have it in critical infrastructure where business continuity is coming into force. Building resilience and ensuring that they have a viable plan with certain events and natural disasters.“
“Companies tend to overestimate their resilience. Your ability to recover fast will mean something for your competitive advantage. Climate change means that everyone is hit in the same way, at least within a confined geographical area, and then your recovery time and your ability to get back to business is going to be a huge competitive advantage.”
This statement is especially true when it comes to larger organizations that can afford to have redundancies and backups to core business functions. They tend to have multiple locations and Business continuity plans to help offset losses. For smaller to medium-sized businesses (SME), a natural disaster can mean the end of the firm. They may not have enough resources to allocate or have the option of relocation with little notice. This doesn’t mean they shouldn’t invest in business continuity plans. Creating a business continuity plan (s) allows SMEs to create redundancies when needed, trim down investments that aren’t useful, and most importantly focus their plans on survival. Larger organizations may be less agile to invest in survivability and more so on compliance and recovery.
However, both types of organizations will be able to see their return on investments and improvement on their risk management if they invest in their Business continuity planning.
What is the Return on Investment (ROI) for Business Continuity?
“You are able to handle more risk because you know more about your critical processes and how to protect them. One of the key returns on investment is your ability to do business and recovery your critical processes faster than your competitors. I think insurance companies will be interested in a business that can show they are prepared and resilient.”
According to the United Nations Development Programme (UNDP), finance for reducing disaster risk is bias towards preparedness. It is easier to finance risk and disaster if you have taken precautions to lower the risk. Risk sharing may occur through insurance (a mix of public, private, catastrophe bond markets, sovereign pooled funds and by the government as the insurer of last resort).
“If you can convince your insurance broker that you are able to recover your business significantly faster then you should be able to negotiate your premium. It’s part of your return on investment. Recovery is also ROI since the faster you recover the less you lose. It’s easier to convince a board on the importance of business continuity if you have an ROI.”
The biggest test for business continuity will be Brexit
“We will have the biggest business continuity exercise in recent times with Brexit. The ones that are preparing now will be the ones that come out on top. They are exercising, they are trying different things, they are trying different recovery strategies.”
According to the Financial Times, many small businesses in Britain lack preparation for Brexit, while medium to larger businesses are doing drastic contingency plans relocating operations overseas, stockpiling goods, cutting jobs, or adjusting supply chains outside the UK. The most prepared industry being the financial sector and pharma with the least being manufacturing.
The Federation of Small Businesses estimated just one in seven small companies was making contingency plans for if the UK crashes out of the EU.
“With each release of the Government’s technical notes, we get a clearer picture of how dangerous and damaging a sudden no-deal Brexit will be for our small businesses.
What these technical notes highlight is the risk that in particular exporting and importing small firms will be hit with additional cost burdens and complicated levels of compliance that they simply can’t handle.”
– Mike Cherry, chairman of the Federation of Small Businesses
Business continuity is becoming more and more prevalent as the rapidly changing world adjusts to external forces outside the firms’ control. It becomes increasingly clear that organisational resilience will allow firms to be more agile and that business of all sizes will need to have business continuity plans in place in order to survive.
Jacob Taarup-Esbensen, PhD: Is a Krizo expert advisor with a background in International Business, Risk and Business Continuity. He has over ten years of leadership experience managing large aviation networks and ground operations, including developing and applying Environmental, Social and Governance systems.