AnalysisBusiness continuity should be about thriving, not merely surviving
For too long business continuity has been discussed in the context of dire events such as a terrorist attack or natural disasters; it would be better to discuss the tipic in the context of the company’s over-all performance, paying special attention to the perspectives of the investors in the company
When people talk of business continuity they typically conjure dire events such as terrorist attacks or a marjor natural disaster as the context for the discussion. Patrick Roberts of consulting firm Needhams 1834 says this is the wrong approach. If nothing else, “surviving” a terrorist attack or a natural disaster, desirable and essential as it is, is not sufficient; businesses are about thriving and growing, not merely surviving, and business continuity planning should be examined in light of what it can do to help a business thrive, not only survive. Roberts suggests that we consider business continuity planning — and discuss it — in the context of adding value to the enterprise.
Business continuity management is about managing — and reducing — risk. Beyind reducing risk, however, effective business continuity management will also effect expected return in a number of different ways. For example, the direct and indirect costs of business continuity management (maintaining back-up sites, buying flood insurance, investing time in training staff) add the the cost of doing business, but developing a reputation as a resilient and sturdy business may attract customers who want to know that they are dealing with a business that will be here even after the next natural disaster.
The two key variables Roberts suggest we consider are systemic versus non-systemic risks, and diversified versus undiversified investors. Without going into too many technical details, economists have stipulated that diversified investors are more concerned with systemic risks (changes in the price of commodities, economic cycles, interest rates, etc.), and are less willing to tolerate expensive measures aimed at reducing the non-systemic, or idiosyncratic, risks specific to one of the companies in which they are invested. For this group of investors, business continuity management spending must be justified in terms of increasing expected returns. Non-diversifed investors, however, have a very strong interest in reducing the risk to the company, and, therefore, are typically more willing to accept a significant reduction in expected return to provide sturdy business continuity management measures to the company in which they have invested heavily.
The high management of a company should be aware of the kind of investors the company has, and the distribution of equity among them, and tailor the company’s business contiuity policies to the preferences and sensibilities of these investors.
-read more in Patric Roberts’s Continuity Central discussion
