| Business continuity – a gathering storm? Two fairly recent reports, though not specifically aimed at business continuity professionals, have very significant ramifications for BC managers around the globe. The first, from the Hazard Research Centre of insurance brokers, Benfields, dealt with issues of global warming. Another, ‘Supply Essentials’, published by PriceWaterhouseCoopers, provided a global survey of the utilities sector. Though not dealing with business continuity per se the information contained in them seems quite prophetic. The Benfields’, report ‘Global Warming 2004’, covers the effect on insurance claims due to global warming. Now, there is some debate as to whether global warming is indeed a real phenomenon, but the findings in the Benfields Report – whether caused by global warming or by cyclical climate change are a cause for concern: whatever the cause we are in a phase of increasingly destructive weather conditions and this is exposing our homes and business to a number of weather related threats such as flooding and the consequential effects of infrastructure damage, such as telecommunications, power and water. Of even greater concern, as the report points out, is that coastal regions are likely to bear the brunt of destructive weather conditions and four fifths of the world’s population (and hence real estate) is concentrated in such places. Benfield’s focus was on the potential for rising insurance claim resulting from property damage – but the potential for an environment of increased business disruptions due to the consequences of adverse weather is obvious. As many business premises will be located in areas that are the most densely populated, many firms will have their tangible and non-tangible assets concentrated in the areas of greatest risk. In 2004, PriceWaterhouseCoopers issued its ‘Supply Essentials’ report on the electricity sector. Again this report was not aimed at the business continuity community; rather it was a survey of the utilities sector in general. Garnering opinions from the chief executives of power companies around the world the report provided analysis of the state of the industry through the eyes of the most senior staff. One important aspect of this was the CEOs’ opinions on the stability of electrical power supply. In Europe , many executives did not expect that the stability of the power distribution networks to improve substantially and many expected a deterioration of stability. Clearly, the availability of electrical power is probably one of the most fundamental needs of any business today, even back-up power supplies will only last for so long. Scare mongering by consultants or a verifiable trend? Some Continuity Central readers will already be in receipt of SDPL’s free newsletter ‘Thin Ice’ that analyses business interruption events across the world. While we make no claims that our ongoing survey is exhaustive, it is probably the largest business interruptions database that’s publicly available, so we decided to take the observations from the above publications and see if our data supported or challenged the observations of Benfields and PWC. The graph below is taken from the December edition of Thin Ice, which shows the cumulative totals for business interruption events between March 2004 and December 2004. It shows quite clearly that power failures are the biggest category of failure by a large margin (the numbers on the X axis refer to number of events). Adverse weather as a separate category is also a major contributor (we should also point out that, because of the wide-ranging disruption of the hurricanes in the US last summer, we are waiting for government-produced statistics before we include these in our database). When these are included ‘Adverse Weather’ could achieve the ‘public enemy number 1’ slot. Readers might also like to reflect that adverse weather often causes power and telecommunications outages; therefore there will be a strong correlation between increasingly disruptive weather conditions and damage to critical components of national infrastructure – which both individuals and businesses rely upon.
Again we stress that our figures are not based on an exhaustive survey – it’s just not possible to capture every event. What is a reasonable conclusion to draw however is that there is at least empirical data to suggest that we might well be entering into a phase of increased likelihood of business interruption risk from sources over which we have little individual influence. Business continuity managers might wish to consider: * Are our off-site facilities appropriately sited? Should we consider inland facilities that are not sited near flood plains or potentially ‘at-risk’ coastal locations? * How would we cope if storms and floods destroyed transportation systems and roads? * What do we know about the robustness of our local utilities infrastructure? If readers of Continuity Central would like to receive ‘Thin Ice’ on a regular basis (there is no charge for this), please send an e-mail to info@sdplconsult.co.uk with the words ‘Thin Ice’ in the subject field. Stephen Dance is partner at SDPL.
•Date:4th March 2005 •Region: World •Type:
Article •Topic: BC general |
