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Preparedness, Business Continuity, and Risk

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A recent study indicates that a two day interruption of key business functions could cost your business $3M.  As most businesses are in urban areas, you could face much worse. One of my clients is located in Ferguson, Missouri and they have had weeks of disruption.

If your company is to continue operations during an upheaval, then the people who do the work must have the skills and resources needed to get through each workday. This requires a common-sense approach to urban survival planning for your employees rather than trying to create urban survivalists who grow an acre of food, raise goats, and live in underground bunkers, or worse having an entirely unprepared workforce. As most of your workforce probably lives in an urban setting, this bears serious consideration.

After researching this topic for several years I have come to the conclusion that you can’t train all your employees. You must select key people and train them and then make every reasonable effort to retain them. This may require a change in the corporate culture. It will certainly require looking beyond the next quarterly results.

Unfortunately, most business owners are risk-takers. They will see a major urban upheaval as an unlikely event. They will take the risk that during their tenure the event will not occur. This characteristic also explains many business failures, data breaches and large scale fraud events.

Business leaders need to understand their risk-taking behaviour. Without this risk-taking the business wouldn’t exist. Unfortunately, this same risk-taking may also destroy the business. Does your business have a risk committee of the board and does it consider this risk? Many businesses have an audit committee and compensation committee, why did so many abandon the practice of  having a risk committee?

The full board has overall responsibility for risk oversight and this mirrors board responsibility for overseeing strategy. When an audit committee takes responsibility for risk management, the result is usually, in my experience, unfocused and inept. They do not have the skills and knowledge needed to evaluate all the business and operational risks faced by the enterprise. Audit committees often obscure the transparency needed for effective risk management and risk oversight by authorising such things as off-balance sheet transactions.

A separate risk committee of the board is not a one-size fits-all solution, but companies facing rapid changes in the business environment and emerging risks such as new technologies and security threats, should have a risk committee. Deteriorating urban infrastructure, poor city governments, inept policing, IT security, and other factors that affect business operations in our degenerating urban conditions certainly advocates the creation of a proper risk committee with business continuity on its agenda. The committee usually requires independent directors with specialised knowledge and experience with the critical risks facing the enterprise.


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