UPDATED:: Quake in Japan illustrated fragility of “Global Supply Chain” & flaws in conventional “wisdom”
Monday, 1 October, 2012 Leave a comment
Business continuity planning life cycle (Photo credit: Wikipedia)
The case for a Company to maintain a current and comprehensive Business Continuity Plan does not come much better than this example from HP!
Modern global supply chains, experts say, mirror complex biological systems like the human body in many ways. They can be remarkably resilient and self-healing, yet at times quite vulnerable to some specific, seemingly small weakness — as if a tiny tear in a crucial artery were to cause someone to suffer heart failure.
Of course EVERYONE hopes that they never have to contend with what the Japanese nation have had to live through. But, at a time in the history of our planet, when the impact of events on the other side of the planet have truly global repercussions, “HOPE” isn’t much of a strategy!
5 minutes. 5 hours. Or 5 days. An adaptive enterprise that is capable of rapidly adapting to a continuously changing "Operational Risk Ecosystem" within minutes or hours, will have the highest likelihood to survive. Days could mean the end of the relationship with customers, employees and your vital supply chain. Corporate obituaries are all too common soon after a significant business disruption. Whether physical, cyber or both, the adaptive enterprise is not only resilient but also possesses the most sought after business risk asset, an effective "Decision Advantage."
How long can it be before failure to prepare a Business Continuity Plan becomes a major GRC (Governance – Risk – Compliance) issue?
Will insurers and reinsurers be able to offer the cover limits and premium levels required by Global Supply Networks?
Without real-time capabilities, how can underwriters assess, rate and respond in timeframes adequate for the pace of global business?
With Global brands already responding to (and reaping the benefits of) customer demands to adopt “strategies for sustainability” – can these really function without an infrastructure that is truly resilient?
Increasingly, “smart companies” are those that INVEST IN LOSS PREVENTION – developing Risk Leaders and Crisis Leaders, instead of SPENDING ON RISK PROTECTION – or overpaying for insurance contracts and risk management that lacks the Requisite Variety of the enterprises they purport to protect!
The thinking behindis all about accepting that complexity adds to the uncertainty – and, therefore, risk – of modern living. We CANNOT predict what will happen but that does not mean that we should not prepare, as best we can, to survive unforeseen and unforeseeable events, by building robustness [or resilience] into the systems and ecosystems upon which we depend.
It’s a “VUCA World”: one that CANNOT be predicted by the keenest minds, most elegant mathematics or high-powered supercomputers. A world that is constantly under construction…NOT Gaussian, not linear and not the rational, single equilibrium, world of classical economic theory or Modern Portfolio Theory…in the real world lean is fragile and contagion an ever present danger!