News on 24 January 2001

Business 'complacent' about risk management

This is 'Business Continuity Awareness Week' apparently but if you weren't aware it's not surprising since, according to a survey by the Institute of Management, UK business is "dangerously complacent about risk management."

Despite emergencies such as the flood and rail chaos and the fuel crisis UK businesses have not been stirred into action to confront upheavals like these in the future. An overwhelming 93% of managers surveyed admitted their businesses had been disrupted by the September fuel crisis, with 66% highlighting disruption from rail problems and 64% from the autumn flooding.

However, less than half (45%) have taken measures to reduce the impact of a future fuel crisis and a mere 16% and 23% respectively have thought about preparing for rail and flood problems.

This situation will have to change warns the IM. If business leaders ignore voluntary codes for much longer they will face the heavy and costly hand of additional regulations. The current Government review on company law is seeking to include recommendations outlined in the Turnbull Report, which will bring risk management within the scope of directors' legal duties.

Despite the level of recent business disruption, the IM's survey of managers - commissioned by a group brought together by Guardian iT Group, including the Business Continuity Institute (BCI) and BRE/LPC - reveals that only 75% saw business continuity issues as important, compared to 81% in a similar survey in May 1999.

Among the key perceived threats to business were: loss of IT capacity (82%); fire (62%); loss of skills (59 %); loss of site (55%) and damaging corporate image or reputation (50%).

In terms of dealing with the specific threats, 59% of managers fear that a loss of skills would have a significant effect on their business' performance, but only 28% of organisations have any plans to deal with this situation.

As the employment market continues to tighten, concern about loss of skills has leapt by 22 percentage points (from 37%) in comparison to the May 1999 survey. Yet the number reporting that their organisations have plans to manage the disruption caused has risen by a mere 4 percentage points (from 24%) on last time.

Even among those organisations that do make plans to safeguard against disaster there is still room for improvement. A worrying less than half (49%) of organisations tested the effectiveness of their business continuity plans at least once a year, with 40% confessing to never testing a plan. Moreover, 48% said they did not test their plans against any sort of objective standards or benchmarks.

Mary Chapman, director general of the Institute of Management, commented: "In an increasingly tight labour market, where employers are reporting severe difficulties in recruiting new staff, managers should be assessing the costs of losing staff and looking to manage such risks by focusing on retention strategies".

She added: "By taking the time to assess risk and plan in advance, companies can manage effectively if and when disaster strikes. What is essential is that employees throughout the organisation take part in the planning and know how to act when the worst happens. Equally, by testing the effectiveness of their plan on a regular basis, organisations can ensure it continues to meet the needs of the business".

Richard Byatt

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