The following Risk Watch article by Dr Alan Waring was published in the Cyprus Financial Mirror, 7-13 September 2005, www.financialmirror.com.

I have written this article just as I am about to fly off to Beijing to present a paper on Public Policy and Management of Disaster Reduction at the Asia Disaster Reduction Conference organised by the PRC government and the UN. Writing that paper caused me to reflect on the Cyprus context and then the Helios tragedy happened. I have chosen not to comment on the latter until the official investigation reports are out and anyway there are enough other potential disasters lurking that deserve attention.

In recent months, Cyprus has experienced a spate of strikes – from airport staff, taxi drivers and lorry drivers. While just an infuriating nuisance to most people, certainly in cumulative effect these strikes were also damaging to the Cyprus economy and reputation abroad. However, more acutely, these strikes brought a number of sectors to a standstill. If the strikes had continued, doubtless many companies unable to get vital supplies and goods moved would have suffered greatly and some would have gone bust.

‘So what?’ you may say. ‘Strikes happen. They are just another risk of business life. There’s surely not much that can be done except hope and pray that it is not our company that is badly affected.’ Well, things used to be seen with such fatalism in much of the developed world until a few years ago. Then along came the end of the 20th century and the ‘millennium bug’ with the prospect of the catastrophic failures of some computers as their internal clocks were expected to go on the blink at just past midnight on 1st January 2000, affectionately dubbed ‘Y2K’ (Year 2000).

As it turned out, the Y2K risk was a bit of a damp squib. However, it did bring home to companies the need for ‘what if?’ contingency planning – something few had ever contemplated. Just as the Y2K issue was fading, the catastrophic terrorist attack on the World Trade Centre in New York on 11 September 2001 demonstrated conclusively that even companies not hit directly by the destruction of the twin towers could just as easily be damaged beyond recovery. Many companies who were supplying businesses in the WTC suddenly lost a large part of their customer base and had no prospect of being paid. For many, Business Interruption Insurance was inadequate or non-existent and recovery was next to impossible. One could cite an endless list of other recent examples where countless businesses have been snuffed out not only by direct destruction but by indirect collateral effects of various risks to assured supplies, essential infrastructure or payments by customers. Two or three years ago, few in the Far East could have contemplated the possibility of the SARS epidemic and its awful effects on individuals, companies and national economies. Less than a year ago, few had heard the word Japanese word tsunami and most of those who were aware of it considered it to be only a remote theoretical possibility. It is perhaps some irony that here in Cyprus every summer we celebrate the ancient kataklysmos – the Great Flood - yet often ignore the possibility of all manner of other cataclysms befalling us here, now, today or tomorrow. Of course, only other people get damaged, don’t they- ‘it’ will never happen to us!

A Welter of Potential ‘Show Stoppers’

Not so long ago, I asked a leading property developer in Cyprus to tell me what he thought the top three potential ‘show stoppers’ were for his business. He really had not got a clue, not even the prospect that the current drastic fall-off in the numbers of UK buyers might be more than a temporary blip. Well, with the effects on the construction industry of the recent lorry strike, perhaps he now has at least a bit of clue! The whole area of supply and value chain vulnerabilities is one that is often poorly recognised and addressed. Single-source supplies of critical components, equipment or services are a big risk. They can suddenly stop supplying your company for many reasons – fire, flood, strike, bankruptcy, failures by their own suppliers etc etc. Customers can disappear rapidly to other countries if they get better deals or if Cyprus prices are too high. But what about other show stoppers? There is an old axiom that ‘no one is so good that they are indispensable’ but in reality many organisations are critically dependent on the work of one or a small number of key employees. They may be the super-salesman, the design team or the brand-name entrepreneur. Not indispensable but extremely difficult to replace quickly. It may take a year or even more to replace such individuals with comparable candidates. Meanwhile, business suffers and cash-flow collapses, perhaps beyond recovery.

Business Continuity Planning

Over the past 5 years, more broad-based Business Continuity Planning has become a standard feature of the risk management systems of virtually all large organisations – at least those that take risk management seriously as an essential part of their corporate governance responsibilities to shareholders and other stakeholders. However, not all Business Continuity Plans are as robust as they should be and I still encounter plans that are stuck in a Y2K time warp – dominated by and fixated on IT failures. Others are dominated by the narrow interests of particular service contractors and other Uncle Tom Cobbleys who have jumped on the bandwagon but who lack a solid understanding of and commitment to risk management principles. Seminars and courses on the subject are burgeoning but often these are delivered by relative dilettantes who see risk management just as a commercial opportunity that anyone can exploit rather than as a complex subject requiring professional qualifications in risk management and in-depth experience.

There are standards for Business Continuity Planning and Business Risk Management and any BCP is unlikely to be effective if it has been dreamt up without due consideration of these and the wider risk management context of the organisation. Business Continuity Planning needs to be carried out and owned by company executives but it also usually needs independent professional guidance, input and review to ensure that it is likely to work when a ‘show stopper’ comes along.

© 2005 A E Waring

Dr Alan Waring is an internationally recognised risk management consultant based in Cyprus and assists organisations in addressing a wide range of risk issues. Contact waringa@cytanet.com.cy or visit www.awa.demon.co.uk.

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