Will your company survive the crisis

Enterprises sometimes encounter crisis situations. The smaller situations are maybe managed with pure luck, but for the real crisis situations, the enterprise needs a carefully-planned continuity plan. The writer has helped a number of If’s clients to develop their own continuity plans during the past years.

When the World Trade Centre was attacked by terrorists in September 2001, the companies that had prepared themselves with a continuity plan managed the crisis much better than the other companies. Many of the companies situated in the buildings had updated their plans after the previous terrorist attack in 1994, and those plans were now activated. For example a well-known rating company had set up its own ”hot” spare office on Manhattan, where everything was ready if the company would have to move from the WTC premises. Thus, already that same morning the personnel were servicing their clients ”normally” from their new offices.

In their study ” The Impact of Catastrophes on Shareholder Value” (Oxford Executive Research Briefings), Rory F Knight and Deborah J Pretty looked at the operations of 15 major US companies after they had experienced a catastrophe. They found that the companies that were prepared for such a situation and managed to show that they could handle the crisis (the Recoverers) could see their share prices increased by 12% on average after 250 days. However, those companies that were not prepared for the crisis and handled the situation in a less effective manner could see their share price decreased by about 15%.

In the Nordic countries the importance of a continuity plan has been realised during the past years. Quality thinking has caused many companies to improve their operations by documenting their own processes, and risk management with all its sectors has also been defined in writing. The company’s risk management policy, strategy, insurance strategy and continuity plan are now often part of the company’s written processes. Corporate Governance has also helped to spread this way of thinking.

Generally, at least the companies’ IT departments have been thinking about the continuity problems. IT cannot be at a standstill too long before it causes problems throughout any company. As a matter of fact, the companies’ processes are today all so integrated that if one of these parts is out of the game, it will have an impact on all the other sectors. Emergency preparedness plans, media plans and other similar plans are normally in place in different parts of the organisation. The continuity plan, which covers the whole group, is a wide package that bundles up all these plans and provides the framework for the company’s crisis operations during a crisis.

Organising a continuity plan

The continuity actions can be split into three main phases: actions before, during and after the crisis. Before the crisis, obviously the planning must be done including also the continuity plan. The most important thing is that top management must commit itself to the project and communicate this to all parties. Top management will choose the planning group members, who will represent all sectors of the company – at least production, IT, HR, Finance, Logistics and PR should participate, but when needed, also maintenance, purchasing, marketing and storage will be represented in the project.

When the planning group has been formed, a BIA (Business Impact Analysis) will be carried out, i.e. the members of the group will discuss different crisis scenarios, imagining the impact of those scenarios and how to deal with them. If a somewhat updated risk analysis is available, its findings will be used in the work. It is, however, important to realise, that reality is often much more amazing than what we can imagine, and it is impossible to plan for all situations. But the framework for crisis management can be built, and the processes with which the crisis management will proceed in a controlled way can be defined. To operate in a crisis often needs some improvising, and if that can be done based on check lists and directives prepared in advance, it is possible to save a lot of time. In the projects where the writer of this article has participated, the best results have been reached when the planning group really has been enthusiastically working together from the beginning and the discussions have been lively. As a so-called spin-off effect, valuable information about other parts of the organisation has come out that might not otherwise have been available to all participants.

Information and communication

Communication and media planning is an important part of the Continuity Plan. It has been said that no crisis can be so bad that it couldn’t be worse through bad communication. On the other hand, a crisis can be turned into an advantage by handling the communication in an exemplary way.

The media plan defines who will inform what and to whom and in what order. One way is to split the information into two parts the initial information and the follow-up information. The contents of the bulletin must be planned including who the receivers will be, what media and channel are to be used. Generally there should only be one person and his substitute who will give out information about the crisis, and to whom all contacts should be directed. It is most important not to give out false information, and that the information is received exactly as it has been intended to.

When the crisis is over, one generally releases a final bulletin where the final facts about the crisis are explained, and also how the crisis finally was handled.

It is advisable to use the available expert training services in crisis communication.

Crisis management in a planned way

It is a good idea to draw a flow chart of how the beginning of the crisis will be handled. It will define the responsibilities and tasks of each organisation level. It might be sensible to divide the flow chart into local measures and Group measures. The chart will also define at what stage the local crisis management teams and the Group crisis management teams will be convened.

The crisis management team is one of the most vital parts of the continuity plan. The team members, their tasks and responsibilities and where they convene should be stated in the plan.

The crisis management team gives advice to the management in matters pertaining to the crisis, and will assess the needs of the parties involved in the crisis. The team will convene whenever needed and makes plans for all the sub-areas. The premises of the team, the crisis management centre, have been planned and reserved in advance. All decisions and pieces of information received during the crisis will be marked in the logbook.

After the crisis

When the acute crisis is over, the “after crisis phase” will commence. This can be split into three parts: psychological first aid, company recovery and learning from losses.

It is natural that HR must be responsible for the personnel’s well being and psychological recovery by recruiting skilled outside help as soon as possible. Directives as to what authority one should turn to and where help will be given will be stated in the continuity plan. There are organisations specified into this activity in most countries.

How the company’s recovery is handled will at the end of the day decide if the company will survive after the crisis. When the recovery plan is drafted, one has to know the company and its resources thoroughly. From that follows that only the company staff can draft the recovery plan and choose the right recovery strategies.

Group level and local level crisis management often need different skills; thus the local level crisis management team can be more or less equal to the recovery team. Recovery includes all the measures that have to be undertaken in order to get the company back in business fast and effectively. The recovery team starts its work simultaneously with the crisis management team. When the group crisis management team is convened, this fact does not cause any trouble, but if the local crisis management team is supposed to convene at the same time with the local recovery team, it might be difficult, and the operation must be planned carefully. It is worth while to specially consider the structure of the recovery team. Persons who are practical and creative should be allocated to this group.

The recovery strategy work starts by assessing the critical needs for the personnel, raw material, machinery, storage and logistics etc. The critical time for certain functions, i.e. the time that the plant can cope without those functions, must be defined. After this the processes and parts of production must be prioritised. After the prioritisation has been done, the recovery strategies for each sub-operation will be drafted. The following matters must be considered in the recovery strategy: what resources are needed to get the fundamental functions back on track within the critical time frame? Can the production be moved to another unit? Is there spare capacity available? Can personnel be moved to another unit? In that case, how do we solve the logistic, IT, overtime and other similar problems?

One also has to remember the legal facts when drafting the recovery plan. Concerning these matters, the company’s legal department has to be consulted. Matters like how to interpret the force majeure paragraphs, what obligations there are towards business partners in a crisis situation and other legal problems will be discussed with the legal department.

Dependencies are one of the key areas in recovery planning. When assessing the risks, the size of all the dependency risks is considered, but the recovery plan has to define how to deal with these risks during crisis. The dependencies can be split into internal (interdependency) and external risks. The production chain has to be considered starting from suppliers of raw materials and commodities ending with customers and logistics. In this work it is a good idea to use the experts from your insurance company.

One must learn from losses. All incidents, even the minor ones, should be analysed. A process of how to follow up the losses and what was done right and what was done wrong should be created. This is normal quality work, but it is often forgotten in connection to losses. The knowledge gained from the loss must then be put to use in training programmes, thus ensuring that the perhaps very expensive experience can be of benefit to the personnel throughout the company.

Communicating the continuity plan and training

When the plan has been completed, it must be communicated to the whole staff. A good channel for this is the company’s own intranet. Staff should be trained in activating the plan. The crisis management team could be trained by using case exercises in order to see whether the plan would function in practice. The plan and all its appendices must be updated continuously. This way the company’s continuity plan will turn into a tool that helps and serves the whole company and perhaps even its survival.


Lars von Hertzen

http://ifnews.if.fi/en/