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Does this sound like you when someone suggests you should prepare your company for a disaster that might happen some day?
“It won’t happen to us." Or, "All this preparation for something that may never happen takes time and money and we have important issues keeping us very busy.”
But tell that to the businesses affected by the natural disasters in Moore, Okla.; Boulder, Colo.; Sardinia, Italy; the Philippines; or Fukushima Japan. Or if you prefer man-made crises, tell that to the businesses impacted by chemical plant explosion near West, Texas; the fisheries impacted by the Honolulu molasses spill, or the three-county area impacted by the I-5 Skagit River Bridge collapse.
Oh, and tell that to their suppliers, their employees, their bankers, their customers and their communities.
A recent survey by APQC (American Productivity and Quality Center) found that 75 percent of large-company respondents had incurred a significant interruption to their supply chain within the most recent 12 months.
Maybe it won’t happen to you, but it could. Not all major supply chain interruptions make the front page.
Responsible leadership requires that you establish risk-management plans so that the most likely major negative events for your business have the impact of a temporary inconvenience rather than a permanent shutdown and destroyed lives.
1. Communication with those most directly impacted
- Do you have contact information for your employees, suppliers and customers to keep them informed? Is that information available if your site is not accessible physically or electronically?
- Can you contact your insurance company, bank, local government representatives, headquarters, board of directors, and PR firm (if you have one)?
2. Access to information
- Do you have offsite (preferably WAY offsite) backup/duplicate/operational systems that are tested and verified with regularity? Do your employees know how to access them?
- Do the right people have offsite access to passwords, logins, software key codes, and security information that will be required?
3. Have you provided accurate hazardous material and other safety documents to local officials?
How to stay in business
1. Financing and cash flow
- The more you deal with paper, the more likely that payments to you are lost for a time. Do you have liquid assets to meet your cash requirements and room in your credit limits to purchase required services?
- Do your supply chain relationships include cooperation for mutual assistance with financial details determined as work proceeds?
2. Backup plans for meeting customer needs
- Do you have “alternative sourcing” agreements with your customers and approved competitors to ensure customer needs are met?
- Can you supply labor and technical expertise to them while your business recovers?
What to do if you’re impacted by a disaster that happens to someone else
Disasters are just as likely to strike your suppliers and customers as they are your business. The supply chain interruption for you will be different, but impactful.
- How can you best support your customer’s continuity plans?
- Do you have the financial strength to forego loss of orders and payments from customers for months or more?
- Do you or your suppliers have “alternate source” agreements to ensure that your needs are met by a qualified source while your supplier recovers?
- Tooling, well-guarded formulas, raw materials that meet your specs and process capabilities and capacity are just a few considerations in managing supplier risk “alternate source” agreements
It is impossible to eliminate all risk, and not wise either. But it is the responsibility of leadership to manage risk responsibly. Know where your business is most vulnerable and decide how much risk is acceptable. And be prepared to execute the plans you have.