Tuesday 6 October 2009

Can Your Organisations Survive Disasters?

PEOPLE working in buildings around Kuala Lumpur were evacuated during the tremor that was experienced in some parts of the country last week. While nothing serious happened in Malaysia, the earthquake which hit Sumatra resulted in serious damage and huge loss of life, particularly in Padang.

At about the same time, Typhoon Ketsana created havoc and destroyed buildings and infrastructure in a number of countries in Southeast Asia. Manila was one of the severely affected cities and the flooding and landslides that came together with the typhoon paralysed the city.

If we look back over the past few years, the incidence of catastrophic natural disaster is becoming more frequent in Southeast Asia. Whether this is a result of climate change is a pressing issue.

However, the frequency and the severity of these disasters also trigger business continuity concerns. There is a need to ensure that the organisational operations do not come to a standstill or are severely affected.

While Malaysia is not situated on the "Pacific Ring of Fire" and has thus far been insulated from earthquakes, it does not mean that we should not consider the risk at all. Given that Malaysian companies are now operating beyond our borders and the fact that some companies have been investing heavily in Indonesia, the Philippines and other Southeast Asia countries, the impact of future disasters would be felt more significantly by organisations and businesses in Malaysia.

The recent riot in Bangkok had disrupted the operations of many companies, including some from Malaysia, when services from the Savarnabhumi airport were totally cut off by the rioters.

In fact, we do experience our fair share of incidents which cause major breakdowns in business operations. For example, the national blackout in 1996 resulted in loss of business and a tainted reputation.

Of course, some saw the opportunity and the independent power producer industry was born. The flood that hit the southern states of Peninsular Malaysia in 2006 which was attributed to Typhoon Utor displaced a large number of people and disrupted business operations.

As more organisations and companies move their business operations online, the availability of Internet services is fast becoming "the critical factor" to these organisations.

In this respect, we had also experienced breakdown of Internet services. For example, during the 2004 Boxing Day, the earthquake offshore Sumatra not only triggered the tsunami in Aceh but damaged the cables off the southern coast of Taiwan, resulting in a complete cut-off of Trans-Pacific Internet services.

Internet access is the lifeline for the business process outsourcing (BPO) industry. As Malaysia competes to position itself as one of the key players in this industry, the risk of being cut off from the world when disaster happens should be assessed seriously and mitigation plans should be put in place to ensure BPO players survive when disruptions happen.

Another factor which is becoming more serious is how much business operations are affected by the spread of diseases. The Avian influenza and the present Influenza A(H1N1) pandemic had caused people to reduce their travel and other business activities.

Industries such as airlines and hotels had been severely affected in the past. Concerns that the present virus will mutate into a more fatal version also creates more uncertainty.

Given the series of disasters that occurred in the past few weeks, the boards of companies or the committees in charge of risks should review the risk profile of the organisations, giving particular attention to those risks that could disrupt business operations.

Management should be required to explain whether there are changes in potential events or occurrence that would surface the risks, their assessment on the worst-case scenario and the risk mitigation plans that have been put in place. This is more critical for larger companies or critical organisations which provide services to the whole country.

Business continuity planning is a plan on how an organisation would recover and restore partially or totally interrupted critical business functions after a disaster or extended interruptions of the functions.

This is part of the mitigation plan to reduce operational risks and to ensure quick recovery of operations to ensure the image of the organisations or businesses are not affected.

For organisations or businesses that are exposed to risks that could affect their operations significantly, a review of the business continuity plan may be appropriate. Sometimes, the plan might have been developed based on different set of assumptions which may no longer be valid or did not take into consideration new emergent risk factors.

The question of whether one' organisation could continue business the day after a major disaster should always be asked by boards and CEOs and they should expect a really good answer from the management. Otherwise, do something!

This article was also published at the Edge Malaysia website:

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