Disasters alert firms to need for continuity management

Economy October 08, 2012 00:00

By Achara Deboonme

The Nation

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While political instability over the past four years has highlighted the need among large corporations for business continuity management (BCM), the flood disaster last year raised such awareness among companies of all sizes.

Demand is expected to rise as businesses realise that amid fierce competition in a globalised economy, they need back-up plans against natural and man-made disasters. The Asean Economic Community (AEC) will be another catalyst.

Vilaiporn Taweelappontong, advisory services partner at PriceWaterhouseCoopers Thailand, said that after starting a consulting business on BCM four years ago amid the political instability, the number of clients increased by 50 per cent after the flood.

"Demand for this service has been on the rise among manufacturing and service-oriented companies, as well as at the national level. Floods hit manufacturing plants hard, but those in service industries also can’t afford to be disrupted, to maintain their reputation."

Official records show that the Thai business sector encountered 18 types of disasters between 1999 and 2009, which caused both human casualties and economic damage.

Among major natural disasters, the tsunami in 2004 claimed the highest number of casualties; while 5,401 were reportedly killed, 11,775 were injured and 2,921 reported missing. Yet it was the 2011 flood that contributed the heaviest economic loss, valued at about Bt350 billion.

Businesses should also have plans to deal with epidemics and changes in weather conditions, aside from man-made disasters that could range from leakage of hazardous chemicals to political protests and riots.

In 2009, 10.6 million people reportedly suffered from low temperatures, while drought hit 17 million in the same year.

"Big banks, energy companies, hospitals and those in utility services were the first to have business |continuity management in place. Now nearly 100 per cent of companies see the benefits of this," Vilaiporn said.

BCM requires thorough analysis of business processes before the drawing up of plans. Then a drill will follow, to test the companies’ readiness to withstand risks.

Vilaiporn says BCM allows companies to see "hidden and unimaginable" risks and prompt them to devise strategies for the risks and revise business strategies accordingly. Among the questions to ask: "Do you know the potential financial and non-financial impact of a business interruption involving major human, physical and technology loss?" Success of the plan depends on the recovery-time objective: how many days the business takes to resume normal operations after the disaster hits.

During the 2011 disaster, Vilaiporn observed a service company expedite its plan to help employees and the community near its office, which was safe from flooding. Once flood water approached the community, the BCM plan put the list of houses on its table and help was extended from door to door. As part of its BCM, community support counts.

Against flood disaster, manufacturing plants may consider building backup facilities. However, others that do not have much money for that could opt to forge an emergency supply contract with other manufacturers, at home and overseas. Most of PwC’s clients are in the supply chain.

No matter what industry they are in, businesses should also have checklists in place on how to deal with crucial information, financial arrangements, evacuation, building protection and so on. Social media have also become part of the measures to deal with emergency cases that affect businesses. Employees, clients, partners, government agencies, employees’ families and media are to be updated regularly on the development of the emergency, recovery status and emergency contacts.

"Some companies see the need for BCM in light of the AEC," Vilaiporn said. "Without barriers to fund flows, businesses need to know how to protect their interests, or they could face takeovers. Manufacturers need to make sure that they can deliver products, or orders could be shifted elsewhere. The Singaporean government recently endorsed a 30-million-Singapore-dollar [Bt745-million] fund to finance corporate BCM planning.

"Yes, BCM can be a selling point, and nearly 100 per cent of com-panies are aware of that," she concluded.