Business continuity and supply chain management

Management Services, Aug 2002

The Chartered Management Institute (formerly the Institute of Management) supported by the Department of Transport, Local Government and the Regions and the Business Continuity Institute, has recently undertaken new research into business continuity and supply chain management.

This is the third survey that the Chartered Management Institute has undertaken into Business Continuity in recent years and we have pleasure in publishing a summary of the most recent results below.

A summary of the recent research undertaken by The Chartered Management Institute supported by the Department of Transport, Local Government and the Regions and the Business Continuity Institute

Business Continuity is defined by the Business Continuity Institute as:

"...the process of anticipating incidents which will affect critical functions and activities of the organisation, and ensuring response to any such incident in a planned and rehearsed manner."

The objective of the research was to explore the awareness, extent, and nature of business continuity among managers and to assess the degree of change and continuation from earlier Chartered Management Institute research in 1999 and 2001. In addition, this survey focused, for the first time, on supply chain or network management and outsourcing issues.

Research for the project was conducted in February 2002, when the views of 674 managers were obtained from a postal questionnaire sent to a random sample of 5,000 individual Chartered Management Institute members. This represents a response rate of 13.5%

Survey findings

Impact of recent crises

* There is evidence of significant disruption to organisations from the 2001 foot-and-mouth and 11 September crises. 58% of businesses suffered some disruption following the events of 11 September, with some 12% saying that their organisations had been severely disrupted. The impact of foot-and-mouth was less widespread, with 44% saying that they had experienced disruption, and 8% characterising it as severe.

* Looking at the impact of these crises in greater depth, some significant variations emerge by region and size of organisation. A significant north-south divide can be observed: in the south-east some 65% of organisations were disrupted by 11 September, whereas in the north-east a significantly smaller 49% were affected. Organisations with larger turnovers were also hit a great deal harder than their smaller counterparts, with some 75% of organisations with an annual turnover of 100-O500 million disrupted in contrast to only 39% of those with a turnover of less than El million.

There were also significant sectoral differences in the degrees of disruption observed. In the case of foot-and-mouth, only 30% were affected in the manufacturing and production sector, in contrast to some 69% in public administration. The major involvement of public sector bodies at local and national level drawn in to deal with its impact, is clearly revealed here. Confirming this picture further, some 55% of organisations that operate on a local level were disrupted by the foot-andmouth crisis, compared with 32% of those that operate at an international level.

Impact of Business Continuity Management (BCM)

* There was clear evidence however that BCM had minimised the disruption caused by both these disasters. Some 23% said that their Business Continuity Plans (BCP) had minimised the disruption caused by foot-and-mouth and a similar number (21%) had benefited during the aftermath of 11th September.

Rise in disruptions experienced by organisations

* The surveys in May 1999 and February 2002 asked respondents what disruptions their organisations had experienced in the past year. All of the 12 scenarios raised in both surveys saw rises. For example, the percentage who have experienced loss of skills in the previous 12 months rose from 1% in May 1999 to some 33% in February 2002.

The incidence of negative publicity stories affecting organisations appears to have jumped too, with the percentage reporting this type of disruption rising from a mere 2% in May 1999 to 24% in February 2002.

* With business disruption on the increase, the need for high quality and effective Business Continuity Management (BCM) has never been greater.

Business Continuity fears

* As table 1 illustrates, the extent of concerns about the possible threats to organisations appears to be on the wane. There was a particularly marked fall in fears about IT failure. This could be a reaction to the anti-climax caused by the failure of the Millennium 'timebomb' effect. But in equal measure, this may be interpreted as organisations becoming adept at dealing with IT disruption, increasingly factoring occasional IT failure into their day-to-day operations. However, it should be noted that loss of IT capacity still tops the list of fears.

* Furthermore, fears about the threat posed by fire and flood can be seen to have fallen significantly over the course of

the three surveys. This latter finding is perhaps curious in the light of ongoing concerns about global warming, and its implications for flood plains and other low lying areas in the UK