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Risk management - What's your emergency?


Published: 06 Jun 2014 Updated: 21 Sep 2022 Update History

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Having contingency plans is essential to keep business moving during a crisis. Frederick Gentile explains how to minimise disruption, particularly when senior staff are suddenly lost.

When you say to people “Do you have emergency or crisis continuity plans in place?” they usually reply “Of course we have – we’ve got our generator, our little black book of contacts etc. – we’re totally prepared.” You then tell them an incident is potentially catastrophic and will take three to six months or more to resolve. Then it dawns on them that they have little or no idea how they would cope.

Disruptions – or crises, incidents, emergencies – come in all shapes and sizes, but what they all have in common is the almost inevitable disturbance they cause to a business. So what do managers fear most when it comes to threats? Not unsurprisingly a survey carried out by the Chartered Management Institute last year showed that loss of IT systems was the greatest perceived threat by managers across a range of organisations. Interestingly, loss of key people ranked sixth in the table, although the emphasis there was mainly on the consequences of severe weather and transport disruption.

Some incidents are fairly common and can be mitigated by solid contingency planning. However, often overlooked or underestimated is the loss of senior management – this does not even rank in the 21 disruptions reported. Yet losing a CEO or a senior manager could prove uncomfortable at best or disastrous in the case of smaller businesses. Company knowledge, years of experience, talent, authority and charisma are often the qualities that disappear from a business, and the people left to pick up the pieces in some cases are simply unable to recover.

In practical terms, issues such as access to key electronic data, sole signatory authority for critical company functions, special relationships with customers, suppliers and alike, PINs, access to documents, keys to safes etc, are just a few examples of the challenges that quickly emerge following the sudden loss of a key figure. Should that loss affect several members of the same company the situation could very easily destabilise and close the company.

What can be done?

At its simplest level, there is ‘key person’ insurance. A company purchases a life insurance policy on its key employee(s), pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, the company receives a financial pay-out that can help to shield their business and keep things running. Policy effectiveness lies in the ability of your broker to understand your business and negotiate the right terms and conditions. This is essential to ensuring you are not unpleasantly surprised in the event of a claim.

While such an insurance policy will provide a degree of financial respite during the immediate crisis, it is of course linked to limitations on cover and financial limits. In effect it is part of the solution but not the solution itself.

Like most things in risk management, the impact of the risk (in this case the loss of employees) should be prevented or mitigated against through appropriate pre-event actions. The risk cannot be eliminated and to ignore the risk is to do so at your own peril. The remaining course of action is mitigation.

In addition to insurance cover there are also many things you can do ‘in-house’.

By way of prevention, it is certainly worth taking the time to understand and assess risk exposure, especially in relation to an issue such as employees travelling overseas. If a particular destination is deemed risky, restricting or organising travel arrangements so that key managers avoid travelling together in groups of more than two or three is one technique. You should have a clear travel policy, to include reference and advice to personal safety through appropriate risk assessment, briefing and training. It may be that special travel security arrangements, such as those provided by the Willis Alert 24 service, are appropriate for certain situations.

Closer to home there is an overwhelming case for documenting as many processes and procedures as possible. This will help enormously to transfer and record that knowledge stored in the minds of your key people.

Deputies or reserves should be clearly identified and allowed to shadow their chief. Access to key information items such as PINs etc should be recorded and accessible to pre-selected people.

What if?

Encouraging a “What if?” culture in the company and among senior managers will help with the more unusual challenges, such as key person loss. Playing out a loss scenario with the senior management team is also a relatively inexpensive but highly effective way of exploring the implications and learning to manage them. You might even want to take the CEO out of the group and have them observe how the team manages.

When a company suddenly loses a high-profile member of the team the initial shock is often followed by an intensification of activity as the team works at damage limitation, filling the void and continuing the business. Despite these priorities, communication remains paramount and it is important to ensure a clear message is sent to all employees in the company, external stakeholders and last, but not least, the family and friends who may be directly affected. Demonstrating control of the situation (and perception is crucial here) will go a long way to minimising the crisis. On this note it is also important to act immediately and avoid paralysis through indecision.

Covering all bases

It is, of course, impossible to plan for every single scenario and therefore what really counts is the capability of the company to respond and recover from a disruption no matter what the cause. Key to this is the preparation of a robust business continuity management system.

Business continuity planning (BCP) is a planned response to an unplanned event. It will enable you to return to business as usual as quickly as possible, to maintain customer and stakeholder confidence, and maintain revenues.

BCP is constantly monitored, evaluated, refined and updated. By writing and completing your business continuity plan you are going to be creating greater resilience and faster recovery which will protect your reputation, and potentially result in reduced costs and disruption; better corporate governance; better risk management and increased confidence. Reputation is key today both within the company and outside it.

Consider asking yourself the following questions:

  • Do you have business continuity plans?
  • Do they include the incident/emergency procedures and a business continuity team?
  • Are you clear about your recovery objectives?
  • What will you prioritise and how will you do that?
  • If you are a large organisation, do you have senior management buy-in?
  • Are there designated teams?
  • Have the people listed in the plan been trained?

If the answer to any of the above is no then it’s time to revisit this issue as a priority.

Above all, such a plan will help you cope with the one thing you hope will never happen – losing your most important people.

Further support and information

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About the author

Frederick Gentile MBE, BA(Hons), Dip Mgmt, AMEPS, is Risk Management executive at Willis Insurance Limited

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  • Update History
    06 Jun 2014 (12: 00 AM BST)
    First published
    21 Sep 2022 (12: 00 AM BST)
    Page updated with Related resources section, adding further reading on business continuity planning. These new articles provide fresh insights, case studies and perspectives on this topic. Please note that the original article from 2014 has not undergone any review or updates.