Minimizing Business Disruption

As we’ve seen with the recent onslaught of hurricanes hitting the Southern United States, disruption is everywhere.  These disruptions are not limited to the area where they occur, but frequently cause problems for the complex structures and systems of today’s businesses throughout the globe.  The business section of the current issue of The Economist looks at this issue in "When Lighting Strikes" and finds that many larger companies, such as UPS, Boeing, and Wal-Mart, have realized that they must prepare for disruptions, but many smaller companies, even when given time to prepare, have not:

This week yet another hurricane swept across the southern states of America. Every time a Katrina, Rita or Wilma wreaks her havoc, firms around the world worry that a vital supplier may have been knocked out of their increasingly global supply chains. In a recent survey by Harris Interactive, a polling firm, and FM Global, an American property insurer, financial executives in Britain and North America said that the top threat to their revenues came not from terrorism or natural disasters directly, but from a breakdown in their supply chain.

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For businesses around the Gulf, property damage is the least of their worries. Relatively cheap techniques now minimise the damage: using top-quality roof fastenings, for example. The biggest challenge during this year's spate of hurricanes has been keeping in touch with employees forced to flee to new locations. Mobile phones proved unreliable as masts were blown down, and Boeing, Southwest Airlines and UPS are among those companies that have modified their procedures as a result, relying more on e-mails, hot lines and their own websites to keep in touch with distant employees.

While most big companies are continually refining their business continuity plans, many smaller firms are not. Recent research by AXA, a European insurer, found that 46% of small and medium-sized businesses in Britain do not have a business continuity plan of any sort, despite being alerted again to the risks of disruption by this summer's terrorist bombings in London. For some, the task is too daunting; the risks too universal. They prefer, says AXA's Douglas Barnett, to assume “they can deal with disruptions as and when they happen.”

In a book published this month (The Resilient Enterprise by Yossi Sheffi; MIT Press), the author, a professor of engineering systems at MIT, gives some guidance to firms that are shy of examining these risks. “Large-scale disruptions”, he says, “rarely take place without any warning ”. By carefully monitoring and analysing near-misses, the airline industry has avoided many a crash. Likewise, says Mr Sheffi, “learning from small incidents can help organisations correct the conditions that lead to accidents.” Lightning can strike twice in New Mexico.