Analysis - Panic stations.
At the moment I would say that people are resigned,’ says Barry Drew, a senior partner with Kitchen & Brown, a firm of chartered accountants based in Helston, Cornwall.
‘I don’t think anybody is panicking at the moment but if foot-and-mouth lasts for eight months, as in 1967, there will be some worried people down here.’
Approximately 10% of Kitchen & Brown’s clients work in agriculture. A further 10% are directly involved in the tourism trade with another 40% indirectly affected by the tourism business.
Although, at the time of writing, there were only two cases of foot-and-mouth in the county in North Cornwall many miles away from Helston, the overall effect on local businesses is tangible. Kitchen & Brown’s response to the crisis has been to begin advising clients on long-term planning and to show flexibility to long-standing customers.
Drew says they have begun drawing up second year accounts for farmers without seeing any money from first year accounts.
‘We have to be a bit careful we don’t go under, but these people have been loyal to us and worked with us for many years,’ he says. The firm has put into place something that would please business crisis managers.
At a time of crisis they make sure their service is visible and continuing as usual.
‘It is all about keeping the business running and how well a service is maintained,’ says John Sharp, chief executive officer at the Business Continuity Institute. And crises seem to be a growth industry in the UK.
Floods, fuel protests, a disappearing train network, more floods and foot-and-mouth have made the past few months sound like a tale from the Old Testament. Only famine, it seems, has been missing. Increasingly, responding to or preparing for disaster is an integral part of management strategy. However crisis preparation or management is an area fraught with difficulties.
Other than the onset of a possible recession – predictions of global meltdown have been with us for a year or longer – and floods, where the vagaries of the British winter can be anticipated to some extent, none of the other recent events could have been predicted.
Certainly no one could have foreseen the momentum of last September’s fuel protests.
Nor could anyone have forecast the pace at which our rail network could breakdown in the wake of the October Hatfield crash. It has become essential for businesses to make formal contingency plans.
And crises do not have to be on the scale seen over the last few months to make them crises. Companies can be hit by extensive IT or personnel problems, or even more ‘mundane’ ones such as damage to premises through fire.
One (theoretical) bright spot from the current run of difficulties is that as the number of problems increase, business should become more effective at preparing for them. Theory though can differ from reality. Despite the increasing incidence of business rupturing events, there is little evidence that companies are planning ahead properly for when the inevitable happens.
A survey published in January by the Business Continuity Institute and the Institute of Management showed that, in the wake of recent crises, a large number of companies were still failing to plan for a similar event occurring in the near future.
Although last year’s fuel protests affected 94% of companies to varying degrees, only 45% have taken any measures to make sure they wouldn’t be disrupted by a similar protest.
Over 65% of companies have been affected by the on-going rail transport crisis but 68% have nothing in place to prevent further disruption to business.
Similarly, almost 65% of companies surveyed felt the effects of recent flooding, yet 64% had done nothing to guard against disruption. Despite this, the survey also revealed that 69% said that if faced with similar problems in the future they were confident their organisation would cope. Is this just wishful thinking on their part?
Probably, is the answer. So what should businesses be doing?
Steve McCallum, a senior manager with Deloitte & Touche’s enterprise risk services unit says the trick is to plan for each emergency or disaster in the same way regardless of what caused it in the first place.
By doing this you can concentrate on what you need to do to survive.
He talks about the need for any business affected by crisis to take ‘three essential steps’.
The first step is to understand what the business needs to sustain itself through whatever crisis it faces. The second is to come up with a strategy to lessen the commercial impact and the third is to implement the strategy.
‘The key to it is to understand the impact on your business. You have got to be able to perform certain activities.
You have to really understand your business and what is critical,’ says McCallum. This is all seems like straightforward, sensible stuff but the figures above suggest it is common-sense advice that is being ignored.
John Sharp at the BCI agrees that what is essential is good planning.
‘You have to decide what is the minimum level needed to operate, then you start to plan for that.
‘It is about keeping the business running,’ he says.
These are the basic tenets of business continuity management. This ‘minimum level’ can involve, depending on the type of problem, making sure the right people are available or having access to the correct IT equipment. So much for the logical.
Stephen Carver, director of communications at the Cranfield School of Management, says that there is now also an emotional side to crisis management.
The battle to win hearts and minds has become crucial says Carver. ‘Because of the way the media works one of the most important things nowadays is to show that you have feelings, that you care,’ says Carver.
Carver uses the case of the Brent Spar protests in 1995 when Greenpeace caught out Shell in the public relations war over plans to scrap the 45,000 tonne oil rig.
This was, says Carver, a classic example of a crisis situation in which the company won the ‘rational’ contest but the environmental group won the ’emotional’ argument. He says such a scenario could re-occur because of the inability of some bosses to second guess public opinion.
‘The problem with most chief executives is that they have got where they are because of an extremely high intelligence quotient, they are not very good at emotional planning,’ says Carver.
All are agreed that planning for potentially big pitfalls is hazardous and extremely difficult. This can be particularly the case for smaller companies.
Multi-national companies with huge resources in terms of money and personnel can absorb large problems more effectively than smaller companies.
Peter Barnes, a business continuity planning specialist with PricewaterhouseCoopers, says small businesses ‘are very much in the line of fire’ when incidents such as foot-and-mouth occur.
The way out for smaller firms could be diversification. Though this is fraught with difficulties too.
Back in Cornwall, Barry Drew recounts the experience of a local farmer who decided agriculture was no longer the answer and decided, at no small expense, to move into a new business by converting farmland over to tourist use.
Then foot-and-mouth happened. As the next crisis is no more than a few months away, probably, the advice is to make sure you have a contingency plan in place.
Planning is the key to lessening the impact of whatever is thrown at business.
After all, given the events of the last few months, it is not as if you have not been warned.
For more on the foot-and-mouth crisis visit www.accountancyage.com/Business/1119157
For news on Internal Institute of Auditors guidance on business continuity see www.accountancyage.com/IT/1119791. The IIA’s website can be found at www.iia.org.uk
Key steps to ensure business continuity for your organisation
1. Understand your business, assess risks and evaluate all recovery priorities.
2. Develop continuity strategies and determine selection of strategies available to mitigate any possible losses
3. Develop a response. Improve operational procedures and practices accordingly.
4. Establish a continuity culture and increase education and awareness of stakeholders.
5. Exercising, planning and maintenance. Develop ongoing testing.