Risk, Crisis and Disaster Management - Report Example

Risk, Crisis and Disaster Management School: Risk, Crisis and Disaster Management Introduction Business establishments with business continuity management departments are far more likely to survive a disaster than their counterparts who have no such departments. In discussing business continuity management, we must understand that any incident that threatens the survival of a business is a potential disaster. When a disaster occurs, there is a possibility that operations may be disrupted for a while, thus raising the question of whether the customers are loyal and sympathetic to forgo purchases until the business is operational. Being prepared for potential disasters makes answering this question a moot point. The preparation needn’t be comprehensive, complicated or cover all potential disasters, it only needs to cover the critical disasters that would potentially cripple business operations for long periods of time (Perrow, 1999). This essay discusses business risks, crisis and disaster management in the understanding that business establishments, whether large, small or medium, must retain the capacity to react effectively and speedily to critical disasters. Most business establishments affected by critical disasters either close shop within 18 months of the disaster occurring or never reopen for business. It is, therefore, important that a business establishment develop a business continuity plan that is comprehensively communicated to all of its personnel and fits with the business model. Simply reopening the business and serving customers is not where the recovery process ends, allowances for stock losses and damage to customer relations must be factored into the recovery process. For small business establishments, whose branches number in the single digit range and serve specialised customer bases, any interruptions in business operations as a result of disaster occurrence is likely to be more damaging and have a disproportionate effect by halting all critical aspects of production and damaging customer loyalty. Financial losses will, in all likelihood, complicate the business establishment recovery process (Heller & Darling, 2012; Smith, 2005). Discussion Business establishments face uncertainties and risks on a regular basis, yet identifying and managing these uncertainties and risks are rarely undertaken. Some of the consequences of these risks and disasters include; confusion and fear; employees being disengaged and disconnected; productivity and quality falling; cases of survivors and paralysing fear of uncertainty; management personnel being overwhelmed; problem solving strategies being ineffectual; innovative capacity decreasing; and loss of business opportunities (Zhong & Sui, 2009). The presence of a central business continuity management team and regular update of a comprehensive disaster management plan that is in line with the business model and ethos will increase the chances of a business establishment recovering from a disaster (Laye, 2002). Disaster management and continuity plans are important components of business continuity management. Business continuity is defined as identifying risks, anticipating crisis and disasters that could affect the business establishment and planning for them to ensure that the business continues to function beyond the disaster. It is the process that institutes a safe and robust business environment able to begin a speedy and operational reaction to a critical occurrence. It is not just a plan placed on paper, but it also entails administration, scheduling, valuation, training, and rehearsal (Lerbinger, 1997). A business continuity plan aids in prevention and preparations for events that would disrupt normal business operations. It sets out clear duties and roles of all personnel and emergency services. It enumerates possible contingencies that allow key business undertakings to continue in crisis. It is a key component in discussing business resilience and ability to handle change, stress and challenges. The plan details clear emergency actions to guarantee the safety of personnel is a core priority. A continuity plan differs from a recovery plan in that while a recovery plan focuses on recovery of data and records essential to keeping the business operation, a continuity plan addresses all necessities vital to keeping the business operational and minimising flow disruptions (see figure 1; Smith, 2002; VMIA, 2012). Figure 1. Interactions of the various components of the business continuity management (Source: VMIA, 2012) The success of a business establishment is as much a function of growth as it is of protection and security. In an environment where risks abound, adopting a flexible management plan that guarantees prosperity in dynamic environments and ensuring survival in a disaster is an asset. The capacity to survive disaster and reopen operations is acute. Financial and commercial benefits of continued operations and speedy recovery from a disaster must also be considered. Businesses with continuity plans are more attractive to conduct business with than those without continuity plans (Perrow, 1999). Business continuity management contains elements of; prevention and mitigation; crisis management; emergency planning and management; and continuity planning (VMIA, 2012). The main objective of a business continuity plan is to ensure that the business recovers all its crucial processes with minimal damage to its reputation among its personnel, partners, customers and other stakeholders. It requires diligent preparation and planning to be successfully developed. Developing a continuity plan involves a series of six steps. The six steps include (Wiltshire County Council, 2006): Step one – reviewing basic emergency procedures, updating them, and training all personnel to observe them. The procedures must be clear, assign roles and responsibilities, and ensure employee awareness. Step two – defining disaster and assessing all risks. Defining disasters and ranking risks, ensure that all incidences are handled with the seriousness that they deserve. A disaster will disrupt operations. Step three – securing the business assets. Identifying assets that are most at risk in case of a disaster ensures that they can be secured to avoid disasters and recovery plans can target them. Assigning responsibilities for specific assets, identifying risks to them, developing contingency plans, and recurring key components minimises the damage by a disaster. Personnel and premises are some of the key assets that must be secured. Step four – writing the continuity plan. Producing a tangible continuity plan facilitates preparations for disasters. The plan must include critical business processes and activities. It should be presented in a generic form that is easily adaptable. A comprehensive business plan will contain; the name and contact details of the continuity manager; continuity management decision making and responsibility assignation structure; critical business processes; details on recovery phasing; emergency communication diversion details; emergency contact numbers for information updates; resource requirements; recovery resources; recovery support contact information; recovery resources requirement; recovery site address; disaster packs locations and contents; contact details of key stakeholders; comprehensive personnel cascade list; location of offsite information backups and recovery process; networking diagram; and precautions during recovery processes. Step five – testing the plan in a disaster trial run. The trial runs are anticipated to identify flaws in the plan and allow for tweaking to increasing chances of continuity. Step six – update plan regularly. The plan should be updated at least biannually with contact details and vital records being the focus. Developing and applying a business continuity plan is a requirement for most insurance agencies and government licensing bodies. Beyond compliance, a continuity plan has the following benefits (VMIA, 2012): Reduce the legal liability in case of a disaster occurrence. A business is expected to manage a disaster effectively. If the disaster enquiries and investigations discover that the business could have done much more to manage the disaster then there is a possibility that they could be held liable for the damage by the disasters. Having a continuity plan and showing that it was used reduces culpability in the disaster occurrence and the risk of being assigned liability. Enhancing and protecting reputation. Effective response to a disaster enhances good reputation. Facilitating the achievement of business goals and objectives. Speedy recovery after a disaster ensures that production continues and company goals are met. Contributing to business resilience. It embeds a risk awareness culture. It allows the business to be flexible and adapt easily to difficult conditions. The success of a business continuity plan and management is dependent on eight critical success factors. They include (Laye, 2002): Committed leadership. Support from top level management will ensure that appropriate resources are allocated to the whole process. Governance. A well-defined governance structure will command and control business functions even during disasters and disruptions. The governance structure should be documented and reflected in all ancillary plans. Integration and alignment between emergency personnel, management, response, and continuity arrangements. Entrenched in the business culture. Continuity management must understand the business establishment’s management culture when developing plans and arrangements to guarantee their efficiency and personnel assignation. They should consider delivery approaches, communication means, and language suitability. Meeting duties and responsibilities. In undertaking continuity management, regulatory, contractual and policy requirements must be incorporated and met with anticipated disruptions understood and addressed in the plans. Reviewing, exercising and updating. The plans must be reviewed for accuracy and cost. Continuity plans may become out-dated, vain and need considerable sums to produce anew if revisions are not conducted in a timely manner. Creating a regular update timetable could ensure that the plan is constantly bettered. The update timetable could include an analysis and review system. The system also functions to organize and train personnel. Learning from experience. Joining continuity management forums and networks, and reviewing industry, insurance and legal case studies allows for picking what works best. Understanding stakeholders’ interdependencies. Understanding all stakeholders and their position, and enforceable contracts that involve them. Conclusion Disaster management is, therefore, the business establishment’s preparedness to cope with disaster occurrence by; defining and prioritising critical business functions; analysing disaster occurrence risks to the business; providing a detailed plan for disaster management and emergency response; and identifying key contacts in case of an emergency. A business establishment is never too small to have a continuity plan. In fact, smaller businesses have more need of contingency plans as disasters are likely to affect them and their profitability more than their larger counterparts. Preparing the plan is just part of the process, revising it, conducting simulations and test runs, and implementing the plan in case of a disaster are the other aspects of the plan that determine its success. References Heller, L. & Darling, J. (2012). Anatomy of crisis management: Lessons from the infamous Toyota Case. European Business Review Journal, 24(2), 151-168. Laye, J. (2002). Avoiding Disaster: How to Keep Your Business Going When Catastrophe Strikes. Hoboken, New Jersey: John Wiley and Sons Publishers. Lerbinger, O. (1997). The Crisis Manager – Facing Risk and Responsibility. Mahwah, New Jersey: Lawrence Erlbaum Associates. Perrow, C. (1999). Normal Accidents: Living with High-Risk Technologies, 2nd ed. Princeton, New Jersey: Princeton University Press. Risk Cover (2009). Business Continuity Management Guidelines, 2nd ed. Sydney: Risk Management Services. Retrieved from http://www.riskmanagement@icwa.wa.gov.au Smith, D. (2005). Business (not) as Usual: Crisis Management, Service Recovery and the Vulnerability of Organizations. Journal of Services Marketing, 19, 309–320. Smith, J. (2002). Business Continuity Management: Good Practices Guidelines. London: The Business Continuity Institute. VMIA (2012). Understanding Business Continuity Management. Victoria: Victoria State Government. Wiltshire County Council (2006). Business Continuity Guide for Small Businesses, Version 0.2. Wiltshire County Press. Zhong, Y. & Sui, L. (2009). Managing Crisis Response Communication in Construction Projects – from a Complexity Perspective. Disaster Prevention and Management, 18, 270–282. Appendix A: Definition of Key Terms (Source: VMIA, 2012) Key Term Definition Business continuity management It is a management process that provides a framework for building capability that safeguards the objectives of the business establishment from business operations interferences. This involves managing a disruption or disaster before (risk management), during (emergency response, crisis management and business continuity planning) and after (business continuity planning) it occurs. Risk management It is coordinated activities that direct and control a business establishment with regard to risk. It is the process of methodically ascertaining, appreciating and dealing with risks as they are encountered. It usually comprises instituting a structure to guarantee the business establishment comprehends its risk environment and is effectively evaluating, handling, communicating and observing its risks. It involves managing all types of risk that include, but not limited to, financial aspects, safety concerns, compliance considerations, operational aspects, strategic placement and business operations disruption. Emergency response It is the protection of personnel, assets and the environment immediately after a disaster occurrence or during an emergency. Crisis management It is the governance arrangements and processes that enable a business establishment to protect its character, value, order, manage media and stakeholders, and appropriately distribute timely and precise information. In addition to managing strategic communications and relationships, it supervises and supports the responses to major emergencies, crisis and major business operations disruptions. Business continuity planning It refers to the process of evaluating the business establishment, scrutinizing its critical activities, interdependencies and susceptibilities, to aid in ranking core tasks and preparing approaches aimed at recovering or maintaining the core tasks in the event of a significant disaster occurrence or business activities disruption. Disaster A naturally occurring or man-made event that disrupts normal operations and requires considerable and coordinated efforts in achieving recovery. It is a critical disorder in the functioning of an element that is beyond its competence to respond to or cope sufficiently with. Crisis It is complex of situations that produce task demand that are out of range of the capability to adapt without using external resources. Risk The possibility that an event or occurrence will have an effect or impact on set objectives. Read More