Minimizing the Risk of Unexpected Events

                Given this past week’s event on a national level, I thought it would be a good topic to talk about assessing risk for an organization.  Risk assessment and the associated preparedness are important to contemplate as part of your short and long range business plans.  Oh, yes, I’m bringing up that business plan thing again.  If you don’t have one, I cannot urge enough to develop one. It does set the vision, objective, and direction for managing the business.  When you consider what the definition of an “Unexpected” event is, this week’s hurricane certainly is towards the top of the list of worst imaginable.  As the news stories come in, it is easy to tell what businesses were more prepared more than others.  This is not to say, all businesses should have an actual full and detailed backup plan in the event of a hurricane, at the ready to kick in.  It is to say, all businesses should have at the least, thought through it to consider what the backup plan would look like.  It is tough to do this in the middle of an event and even tougher after one occurs.

                The first step is to assess the risk associated with your business.  A risk assessment can go into finite detail if that is what is deemed necessary.  The level of risk an assessment should go to will be directly proportional to a certain level of comfort desired.  Risk can come in many forms with the worst being loss of life and the second being a complete loss of the business.  Other levels of risk exist on much smaller scales as well and need to be looked at.  Loss of life is managed in many ways by forced and voluntary regulations, as well as internal rules and guidelines for work practices or situation activities.  Complete loss of the business is harder to prepare for as the offset is for a secondary business structure (physical items) are sitting at the ready somewhere…this is just not practical.  On a somewhat smaller scale, and certainly realistic to have an understanding for, is to have a plan covering a partial loss of the organization due to an unexpected event.  At the least, there should exists a plan for things such as theft, partial fire, partial flood, or other partial damage that interrupts delivery of a product or service to the organizations customer base.  Often times, implementing rules and guidelines can offset or insure against, these types of events happening.  Unless you go through the exercise to determining the risk, you cannot begin to implement a plan which will minimize the risk.

There are many was to cover the organization in the case of a loss due to an event.  While insurance may be structured to offset some or all of the losses, it cannot cover the negative ripple effect across both the internal stakeholders (employees) and the external shareholders (customers).  And yes, it does cost money, so there becomes a gap between what a business is willing to cover when balanced against what it can afford.  Major catastrophic events are hard to bounce back from and no amount of planning can really prepare an organization to handle it.  What does prepare business leaders in these situations along with the financial support from insurance is the internal drive to succeed coupled with the relationships with the work force and those around them.  For smaller events, there is a lot which can be done to insure against risk.  If policies are in place relating to security, test it on a regular basis to insure it is functioning as designed.  Many large manufacturers actually audit procedures using staff from outside organizations.  This ensures a clean and untainted test result, as the internal staff is not tipped off.  Other rules need to be practiced or tested on a regular basis to ensure the required knowledge level is being maintained.  Easy things are Lock Out, Tag Out procedures and fire evacuations.  These can be tested and practiced very easily.  Other safeguards are checking to ensure service vans are kept locked or other equipment is not accessible after hours or when operators are not around.  Again, easy steps to take and can be audited, tested, and revised on a routine basis.

More detailed plans are required for things such as flood and fire interruptions.  These too can be offset with preventive rules and guidelines, but in most cases will require an investment of capital to not only prevent the occurrence but also initiate and employ should the event occur.  Even greater preparedness can lead to having spare equipment staged in remote locations, or secondary facilities which are used only as a backup, but those too can be quite expensive.  One key ingredient to offsetting a major event is also the level of financial strength the organization has.  If it is strong, it is more likely to recover faster even though weaker than before for at least a period of time.  Above all of this however, is the ability to employ the necessary resource’s against a recovery effort.  With this I don’t necessarily mean the amount of resources but the method in which available resources are engaged.  No matter what the answer becomes, the key is to have the discussion about assessing the risk.  It doesn’t have to be a doomsday mentality or session.  If conducted properly, the result will lead to guidance and follow-up for high risk gaps and action plan for lower risk gaps.  The risk assessment discussion just might prevent the unexpected or keep the organization alive on the occasion the “Unexpected” event occurs.

Stay Well

Scott B.