If you knew your health was at risk, would you take preventative measures to reduce the risk or hope for the best?
The answer would seem obvious, yet many businesses ignore this logic when it comes to business continuity planning and risk management. It seems most business bosses hope for the best when it comes down to protecting their livelihood and employees.
'Risk management' is the identification of threats facing a business - flooding, fire, death of key personnel, terrorist attack or product contamination, for example. 'Business continuity planning' covers the implementation of processes to ensure a business can continue to operate in the event of any one of these risks taking place. These areas have shot up the government's and businesses' agenda since bird flu hit the headlines and 7/7 took place.
Investment in this area is traditionally seen as the preserve of large or listed companies required by law to conform to set regulatory standards. However, external pressures mean attitudes in companies outside this sphere have to change.
Large companies are extending these corporate governance requirements further down the supply chain to protect their profitability. Smaller companies that don't adhere to their guidelines can find their eligibility as a supplier withdrawn. Even if you choose to ignore the common sense reasons behind business continuity planning, taking steps to ensure your business can continue in the event of a crisis is a very effective marketing tool.
US-style legal action against 'negligent' employers is also becoming more prevalent in the UK. Management's 'duty of care' is making companies address risks to employees in the workplace or risk expensive legal action through inadequate planning.
Many also believe costs from a crisis will be covered by insurance so extra investment is unnecessary. This is often a mistake. Areas such as lost time, sick pay, damage or loss of raw materials, repairs to plants and equipment, extra wages, overtime and temporary labour, production delays, investigation time, fines, loss of contracts, legal costs and loss or reputation (the list goes on) are often not covered by policies. This must be checked.
Of course, there are hundreds of possible risks and it is impossible to prepare for them all.
However, if you answer no or don't know to any of the following questions - you should take steps to give your company a crisis management health check. It may just save your livelihood.
* Does your board fully understand potential for crisis?
* In the event of a crisis, are they clear on who makes the key decisions?
* Are they properly trained to make those decisions or would a tribunal find them inadequately trained?
* How would you operate if your premises were out of action?
* Are all your records backed up off site?
* Who will you turn to for external support?
* Ultimately, who is responsible for managing a crisis?
* Ray Priestman is a client partner at the Middlesbrough office of Vantis, the AIM listed UK top 13 accounting, business and tax advisory group that specialises in helping growing businesses. He can be contacted on 01642 221331; email: Ray.email@example.com