Business Continuity 3 : Cascading Risks | #ECC2023 | Energy Continuity Conference

Business continuity is the ability of a business to get back to work after something has disrupted it: hurricane, fire, flood, pandemic, or whatever. Business continuity planning is all the planning you do to prepare for disasters before they happen, so you can get back to work smoothly afterwards.

In Part One, I described a basic risk-handling protocol. In Part Two , I described the elements of how you turn regular risk-handling into business continuity planning. But of course it’s complicated. Some risks can wipe you out; others are nuisance level; many are somewhere in between. Some risks require specialized expertise to address them, but their consequences are grave enough that you can’t just delegate them to the specialists and then forget about them. How do you focus?

The answer is that you have to distribute risk-handling throughout your organization so that risks are addressed by the right people, but in a way that always traces back to top management (who have, after all, final responsibility for the organization as a whole). Let me talk about it.

Back in Part Two I said that each member of the Executive Team has to go back to his (or her) people to work out the details of that area’s approach. That step is the key to setting up a system of cascading risk management.

After all, even though business continuity affects everyone, there will always be some actions or some risks that are specific to a particular department or to a particular kind of disaster.

• In case of fire or flood, your operations functions have to think about shutting down their work in a controlled way and getting to safety. Your warehouse function (if you have one) has to think about how to protect your inventory. But your office functions may be able to resume work remotely (once they have all gotten to safety), provided they still have access to your network.
• In case of a pandemic, there should be no significant risk of physical destruction, but you may have more concerns around isolation or availability of personnel.

So yes, you have to start at the top. And the risks you track at the top level are the ones that can wipe you out. But then the members of your Executive Team go back to (let’s say) the middle managers who work for them, to do two things:

• Figure out in detail how to implement the overall strategic approach. (All these steps should be traceable back up through the elements of the high-level strategy.)
• Do an independent risk analysis at that level to see if there is anything special to their areas that was missed at the higher level. Use the same method described in Part One —the very same method that the Executive Team already used.

And then the middle managers do the exact same thing again, engaging with their employees at the working level, to achieve the exact same two goals.

Naturally if (during one of these lower-level reviews) anyone discovers a risk that affects a wider group (or even the whole organization) but was accidentally missed, escalate it on up the management chain to where it belongs and then ask everyone to update their work to account for it.

In the end, every unit in your organization—every division, every department, every plant, every team—ends up doing some level of business continuity analysis, and tracking the measures that apply at their level. And every year, the whole organization repeats the analysis: to identify what’s changed and to check if all the defined measures are still correct and current.

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Michael Mills has spent over 25 years managing quality and documentation systems for large companies and small ones. Now he does internal audits and consults on Quality projects, while regularly posting online. He publishes every week at the Pragmatic Quality Blog (pragmatic-quality.blogspot.com), and writes the Management Light column for the Organizational Excellence Specialists Group on LinkedIn. You can find him on LinkedIn at Michael Mills | LinkedIn.

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Oil & Gas Global Network “OGGN”

Texas Quality Assurance and the #QualityMatters podcast

Houston Young Professionals Network

Business Continuity 2: From Risks to Business Continuity | #ECC2023 | Energy Continuity Conference

Business continuity is the ability of a business to get back to work after something has disrupted it: hurricane, fire, flood, pandemic, or whatever. Business continuity planning is all the planning you do to prepare for disasters before they happen, so you can get back to work smoothly afterwards.

I said in Part One that business continuity planning is a part of risk management in general. Specifically, business continuity planning means identifying all the risks that could interrupt your business, or some part of it, and then taking action to mitigate those risks or planning contingency actions in case they take place. The basic approach is exactly what I described in Part One , but a few features are unique.

In the first place, you have to start with your Executive Team. This is not a job you can delegate to the Safety Committee. The reason is that every entity inside the organization—every division, every department, every plant, every team—has to be engaged. They have to contribute to defining how to secure their work (because they know it better than anyone else); and they have to know what to do in case disaster strikes. So you start at the top.

When you start to identify business continuity risks, remember that you are looking for anything that can interrupt any aspect of your operations. This means you have to look not only at your direct operations, but at any support functions: billing, payroll, purchasing, and the rest. It also means you have to think about anything that can interrupt your customers or your supply chain. If you were unscathed by a disaster, but your main customers are out of commission and won’t be ordering for another year, you could have a problem. Likewise with your supply chain.

When you identify a risk, you cannot assign it to just one Owner. This is one of the big differences between business continuity planning and other kinds of risk management. If disaster strikes—hurricane, fire, flood, earthquake, or whatever it is—it’s probably going to strike everybody. So you can’t assign the whole problem to Fred or Max and ask him to figure out a solution for the entire company. Instead of that, each member of the Executive Team goes back to his people (or hers, of course) to determine how they have to secure their parts of the business. Depending on the size of your organization, some of them might have to go back to their people as well, to work out the details. Do whatever you have to do, but come back to the rest of the Executive Team with a plan for your area.

Then the Executive Team as a whole reviews the plans to make sure they are consistent. You can’t respond to a disaster by pulling in different directions: so while every team has to figure out what they specifically need, the plans still have to mesh together. As just a single example, if you are going to tell the office folks to work from home they should all be using the same communication platform to keep connected. If your team is the odd one out, you might have to change your plan a little to align with the rest of the company. Make sure you engage all the people you engaged before, so that everyone understands what’s changed.

Finally, when all the details have been worked out, document your plans in the simplest format possible, and store them somewhere that’s easy to find in an emergency. Remind people periodically where to look. (If you do regular fire or emergency drills, you might be able to incorporate pulling a copy of the emergency plan.) And mark a day on the Executive Team’s calendar—six months out, or maybe twelve—to do the exercise again.

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Michael Mills has spent over 25 years managing quality and documentation systems for large companies and small ones. Now he does internal audits and consults on Quality projects, while regularly posting online. He publishes every week at the Pragmatic Quality Blog (pragmatic-quality.blogspot.com), and writes the Management Light column for the Organizational Excellence Specialists Group on LinkedIn. You can find him on LinkedIn at Michael Mills | LinkedIn.

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Oil & Gas Global Network “OGGN”

Texas Quality Assurance and the #QualityMatters podcast

Houston Young Professionals Network

Business Continuity 1: Basic Risk Handling | #ECC2023 | Energy Continuity Conference

Business continuity 1: Basic risk handling

Business continuity is the ability of a business to get back to work after something has disrupted it: hurricane, fire, flood, pandemic, or whatever. Business continuity planning is all the planning you do to prepare for disasters before they happen, so you can get back to work smoothly afterwards.

It’s a big topic. In a sense it’s a part of risk management in general, though saying that doesn’t narrow it down much. But let me start there.

You probably already have a risk handling system in your organization, so what I say here will all look pretty elementary. Still, I’ll review it briefly.

Think of the Safety Committee in a grocery store. They brainstorm all the ways somebody could get hurt, and then define measures to keep it from happening. If someone breaks a jar of spaghetti sauce in Aisle 3, put up a “Wet Floor” marker and mop it up. Don’t put heavy things on high shelves. And so on.

Sometimes they might think of a risk that’s not very likely: What if a customer brings his dog and the dog bites somebody? Well, OK. It’s true you want to know what risks you face, and (for example) the ISO management system standards all require some level of risk identification. (ISO 9001, ISO 14001, and ISO 45001 all put this requirement in section 6.1.1.) But you can’t prevent everything, so you need to rank your list in order of importance. Then you plan for the ones that really matter, and let the rest go. But what ranking do you choose? Generally there are at least two questions to consider:

• How likely is this risk?
• And how bad will the impact be if it happens?

Anything that scores high on both questions goes to the top of the list. After that, it’s not so obvious. But here’s one simple approach you can take. Please note two things:

• You can use this approach for any kind of risks. Just now I was talking about safety risks. But your marketing team can do the very same thing with competitive risks. Your engineers can use this approach (or a more sophisticated version of it) as an FMEA (Failure Mode and Effects Analysis) to think through product or operational failures. Your shipping department can do this to evaluate different logistical methods. It is a very general and very powerful tool.
• There are a lot of ways to make this approach more sophisticated, depending on the needs of your organization. What I describe here is the simplest possible version.

Step one: Score all of your risks according to how likely they are, using just three values: High, Medium, Low.

Step two: Now score all of your risks according to their impact—how bad things would be if they happened—using the same three values: High, Medium, Low.

Step three: Use these two scores to calculate a priority for each risk, using the following formula:

Priority = Likelihood x Impact

On this scale, for example, “getting bitten by a customer’s dog” would probably rank Low for likelihood but potentially High for impact, for a composite priority of Medium.

Now that you have assigned a priority to every risk on your list, what next? The next step should be to address the important ones.

• What does it mean to “address” a risk?
  • If possible, prevent it.
  • If you can’t prevent it, take steps now to mitigate the impact when it happens.
  • Also, consider how you will respond when it does happen: those are your contingency actions.
  • To make sure this gets done, assign the risk to an Owner, and assign a deadline by when the actions have to be in place. Then be sure to follow up that they really are.

• Which ones are “important”? It depends on what you are doing. At the very least, you should address all the risks with priority = High. But you don’t have to stop there. Maybe you want to address the Medium ones as well, or some of them. Maybe there are steps you can take for a few of the Low risks too, though typically you should think about them last. You have to decide what works for you. But addressing all the risks rated High is pretty much a minimum.

What happens to the risks that you choose not to address? If the store’s Safety Committee updates their list of risks to include “getting bitten by a customer’s dog” and then calculates its priority as only Medium, they might not plan any action for it. So why put it on the list?

The point is that the priority ratings aren’t static. From time to time—at least once a year, if not more often—you’ll review your list to see if things have changed.

• As you take mitigation steps, for example, the impact of some risks will drop and so their priorities will change.
• The impact of others might rise, depending on changes in the outside world. Back in 2019, most American companies who did business continuity planning probably rated “global pandemic” at a very low likelihood; by mid-2020, it had become a fact of life.
• While you are at it, check whether your contingency plans are still correct and current. Is that still the best way to handle this risk, if it comes about? Are the responsibilities all assigned to the right people, or do you have some tasks assigned to a guy that retired last month? And check to make sure your supplies are all in stock and up to date.
• Assign actions as needed, and follow up to ensure the actions are closed on time. 

So even if a risk falls below your threshold and you decide not to address it right now, keep it on the list. Then the next time you review the list—next quarter, next year, or whenever—you can think about it again. And as long as it stays on the list, you won’t forget.

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Michael Mills has spent over 25 years managing quality and documentation systems for large companies and small ones. Now he does internal audits and consults on Quality projects, while regularly posting online. He publishes every week at the Pragmatic Quality Blog (pragmatic-quality.blogspot.com), and writes the Management Light column for the Organizational Excellence Specialists Group on LinkedIn. You can find him on LinkedIn at Michael Mills | LinkedIn.

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Oil & Gas Global Network “OGGN”

Texas Quality Assurance and the #QualityMatters podcast

Houston Young Professionals Network