Significant weather events are occurring more frequently and – according to one risk management expert – Australian small and medium sized businesses aren’t taking simple steps to protect their future.
Managing Principal Kel Donovan
“Small businesses are far more likely than large organisations to go out of business in the two years after a severe weather event such as fire or flood. This is because they usually have key vulnerabilities – perhaps running all of their IT from an exposed central server room, not maintaining key spares of critical equipment, or operating the whole business from just one site,” said Dynamiq managing principal, Kel Donovan.
“Most SMEs don’t take time to consider their options in the case of a severe whether event. Planning costs very little but, if it’s done right, can make all the difference when disaster strikes,” Kel said.
A new IAG report, Severe Weather in a Changing Climate, reviews and interprets the latest climate science to understand how climate change is impacting the severity and frequency of weather events and what is likely to happen in the future. The report also examines the changing physical risks with analysis of past, present and future climates.
Their analysis shows Australia is facing increasing periods of droughts and flooding rains.
“Bushfire risk is likely to increase in almost all locations nationally, leading to more frequent and extreme events, and longer fire seasons.
“Sea level rise will contribute substantially to escalating impacts from storm surge and the impacts on coastal natural systems, buildings and infrastructure.
“Intense short duration rainfall is expected to increase almost everywhere in Australia, resulting in more frequent flooding in urban areas and in small river catchments.
“Tropical cyclone risks are expected to increase most rapidly in the south-east Queensland / north-east NSW regions,” the report noted.
Natural disasters are costly. The 2018 Red Cross World Disasters Report found Australia’s damage bill for its significant weather events over the past decade was more than $37 billion.
“Planning for these significant weather events must become a major component of any Australian organisation’s business continuity planning. Yet it’s the bigger organisations who do their planning well and we see the clear results when a disaster occurs,” Kel said.
“Larger organisations are usually better equipped to deal with these events because they will have duplicated business processes across multiple sites, offering them a level of redundancy.
“Large organisations are also generally good at removing any single points of failure as their business grows. This is a luxury smaller businesses haven’t yet enjoyed but they shouldn’t bury their heads in the sand.
“SMEs can benefit greatly from identifying their vulnerabilities and planning to fix them.
“Where a permanent fix is not yet viable, the SME should take steps to protect that area when severe weather is imminent or at least take proactive steps to restore operations immediately after the event,” he said.
According to Kel, there are three main considerations for SME’s when undertaking business continuity planning.
- Consider your dependencies
The Japanese earthquake, which resulted in a tsunami in 2011, threatened to shut down parts of the Australian mining industry. In the days after the tsunami, many Australian-based miners realised their consistent supply of haul truck tyres came from Japan. Demand for haul truck tyres soon skyrocketed, drying up market supply for miners around the world. Even some of the largest Australian mines were forced to slow down production and braced for a complete shut-down in the months after the earthquake.
Business continuity planning is not just about how an extreme weather event will directly affect your organisation, it’s about how an event is likely to impact your entire network, including your supply chain. This is why business continuity planning focuses on the business, operations, and interdependencies rather than the risk event itself.
- Have a plan and know your resources
It’s no secret SMEs are often operating with little margin for error. However, when a significant event occurs, you see who has taken the time to create a business continuity plan and who hasn’t. Those with a plan will be putting the plan into action during the event. While those organisations without a plan will be fixated on the actual event until it’s over and then start planning their recovery. The latter approach is simply too slow.
In the Brisbane floods of January 2011, many organisations were taught a harsh lesson in business continuity. A warning came two days prior to the river breaking its banks. The organisations who had done planning were quick to redesign operations to make sure critical things were done, and critical staff were set up to work from home or alternate locations. Less organised businesses simply packed up and evacuated staff.
In significant events, there is usually a rapid drain on resources. Knowing what you’ll need is a vital outcome of your planning. Everyone and everything will be disrupted, including your workforce and suppliers. Things and people we take for granted such as cleaners, trades people, generators, fuel, and clean water are quickly absorbed by the more organised businesses.
What are the minimum numbers of people required to operate your business? What are the critical skill sets required? If you are to run on those minimum requirements, what does production look like? Is it 80% or normal operating levels? Do you need special transport arrangements for staff?
Continuing production, even in a reduced capacity, will improve your chances of staying afloat, maintaining market share and perhaps even growing your market share as competitors fail to recover their business.
Once you’ve got a plan, business continuity is usually viewed upon more positively inside an organisation because it becomes about thriving and not just merely surviving after a significant event.
- Involve the right people in the planning process
Two days of preparation for the Brisbane floods meant plenty of protective measures were put in place. Yet the lessons kept coming. Several global and national businesses had established sophisticated monitoring, control, and backup power arrangements for their IT server rooms. They had conducted an orderly evacuation of their workforce with many critical staff set up with remote access via VPN to continue business. As the water levels rose around the Brisbane CBD, many organisations were reminded their generators and building electrical infrastructure was located in their now-flooded carparks.
The few businesses that had foreseen this, revelled in their foresight as their servers hummed along uninterrupted. However, a few hours later, remote temperature alarms started to sound from overheating IT equipment. This IT equipment, critical for enabling remote work, was now overheating in server rooms with no air-conditioning. In some cases equipment had to be shut down remotely and in other cases the equipment simply failed.
In these examples, the planning had been done. However, the right people were not included in the planning process.
The increasingly networked nature of the global economy, infrastructure and supply chains, makes understanding our vulnerabilities, particularly in regard to IT networks, more complex than ever before.
Business continuity planning is an effective approach to analysing a business and its interdependencies. Where vulnerabilities are identified, arrangements can be put in place to survive a disruption, and even capitalise on the opportunities a disaster can present.