• Thursday, May 30, 2024
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BusinessDay

COVID 19: The need for business continuity plan

Covid-19

With the global crisis caused by Coronavirus (COVID 19), many firms are concerned that their 2019 strategy targets will not be achieved. ‘’We are in a serious trouble! With the way things are going, we have gone beyond hoping to meet our 2019 growth targets.

We are now wondering if the business will survive till end of the year!  We cannot bring in some of our key raw materials, demand is rapidly reducing, loans must be repaid with new credit lines almost non-existent and both fixed and some variable costs need to be met, a CEO lamented! You are not alone, it is the situation of many firms both in Nigeria and other countries. It is a global challenge and encouragingly, it is receiving a concerted global effort to tackle the plague, I tried to console my friend, the CEO.

We pray that they succeed but whether they succeed or not, I need a solution to my business problems, he further grieved! Do you have a Business Continuity Plan (BCP) and if you don’t, don’t you think that you need to carry out a Business Continuity Exercise (BCE), I asked? His reply was not reassuring as to whether he understood either the meaning or the importance”.

According to ISO22301 (2012:2), ‘’Business Continuity Exercise is a holistic management process that identifies potential impacts that threaten an organisation and provides a framework for building resilience with the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities’’. The focus is on having a management system in place that creates, executes, monitors, reviews, maintains and improves the capability of the business to continue its growth and performance even when faced with many challenges.

In a layman understanding, Business Continuity Exercise is like carrying out a Business Impact Analysis of the challenges facing the business with an aim to develop ameliorative strategies for the continued growth and performance of the business. With regards to the COVID 19, a business continuity exercise needs to be carried out by firms to critically evaluate the impact of COVID 19 on their businesses and then innovate strategies for their continued superior performance.

With a focus on COVID 19, what is required in the first instance is for CEOs to understand and appreciate that while it is primarily a health challenge, the socio-economic implications of COVID 19 are wide and complex

In a global survey by Mercer covering over 300 firms in 37 countries, about 51 percent of the firms lack a developed BCP to combat the COVID 19 challenges. Though COVID 19 is a sudden occurrence, the absence of a BCP across many firms is a management failure that further demonstrates the reactive approach to management of firms. With the recent experience with Ebola, it can be argued that CEOs of Nigerian firms without a detailed Business Continuity Plan have a question to answer as to their vision and leadership capabilities. Moreover, as COVID 19 is just one of such challenges requiring a BCP to tackle, the importance of a detailed plan in the face of other challenges such as cyber-attack, major foreign exchange risk, earthquake and loss of significant input supplier or market share cannot be over emphasised. A random interview of CEOs revealed that the absence of a BCP can be attributed to lack of knowledge and understanding, lack of commitment, lack of budget provision, absence of corporate buy-in and complacency.

As a well-developed Business Continuity Plan helps to reduce uncertainty, instils confidence and enables competence for sustainable and superior performance of a firm, it is important that it is embedded as part of the culture of a firm. Interestingly, this can be achieved through a four-stage process that includes: First, detailed understanding of the firm. Second, careful determination of the appropriate business continuity management strategies. Third, effective development and implementation of a business continuity management response and fourth, regular exercising, maintenance and review of the plan.

While some CEOs complain that carrying out a BCP is expensive and complex, the interesting aspect of the exercise is that the benefits always outweigh the costs. Moreover, it can be done in phases and with minimal costs. Irrespective of the method used, what is of central importance in the development of a BCP is the actual testing of the plan to ensure effectiveness and robustness. This too can be done in a progressive way that is cost effective starting from component and module tests and then increasing to linked tests and disaster drills.

With a focus on COVID 19, what is required in the first instance is for CEOs to understand and appreciate that while it is primarily a health challenge, the socio-economic implications of COVID 19 are wide and complex. Having such a mindset is necessary for the development of an effective BCP.

It will help in having a holistic assessment of the impacts of COVID 19 not only on the firm but also on all the stakeholders of the firm. These include but not limited to employees, input suppliers, buyers, communities, government, competitors. With such detailed appreciation and understanding of the complex consequences of COVID 19, a firm will be better informed of the challenges it faces and the short, medium- and long-term strategies required to ameliorate and solve the challenges.

As earlier pointed out, while a detailed BCP plan can be expensive to develop and test, it can also be done in a most cost-effective way and tested using the talk-through method. What is important is to ensure that whatever testing method is used passes the criteria of being stringent, realistic and minimal exposure of the firm bearing in mind the wide benefits of a well formulated Business Continuity Plan.

Franklin Nnaemeka Ngwu

Dr. Ngwu is a Senior Lecturer in Strategy, Finance and Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum.