Transcript Session11-BCCS - PowerPoint Presentation

The Value-Driver Approach to Business Continuity
A Cost-Effective Variation
Tamara Nolan, Senior Associate
New York, NY
March 18, 2009
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A cost-effective, swift way to build business continuity
management capability begins with embracing leadership’s view of
critical value drivers
Traditional BCM Approach
Value Driver Approach
Adopts a bottom-up, comprehensive perspective to
evaluate functions and processes
Adopts a top-down, strategic perspective to
evaluate sources of value and generate buy-in
Systematically examines all of the organization’s
business processes and then determines criticality
Examines only those business processes that
leadership sees as critical to:
“Cold” data gathering involves multiple meetings to
get the answers
 Revenue/Operations
 Brand
 Reputation
Often a complex “one size fits all” methodology that
does not easily incorporate dynamic changes to the
business environment
Hypothesis-driven data gathering with limited
demands on executive time
Scenario-based planning
Customizable and flexible approach based on
organization’s specific value chain
Can exhaust program resources by lasting 8- to 12months
Effects-based planning
Generates savings in development costs based on
8- to 12-weeks timeline
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Recent experience demonstrates that complex risks and massive
impacts have heightened the need for resilient businesses
Financial
Crisis
Indirect Impact
Business Consequences
Adverse
Media
Exposure
Facility Disruption
Tightened
Credit Markets
Distribution
channels
Network Intrusion
Natural
Disasters
Pandemic
Direct Impact
Terrorist
Attacks
Intellectual
Property Theft
Change in
Customer
Demand
Large
Employee
Absence
Equipment
Damage
Inability
to Pay
Suppliers
Public
Infrastructure
Disruption
 Deteriorating operating
performance
 Decreased revenue due to
loss of customers
– Reliability issues
– Lack of visibility
– Slow recovery
– Brand/Reputation
damage
– Lack of contingency
planning
 Increased costs (e.g. overtime payments to reduce
backlog or penalty payments
to customers)
 Legal exposure
 Declining confidence of
citizens and public officials
 Adverse employee relations
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With the adverse effects that poor planning can have, robust BCM
capabilities make sound business sense
 Strong planning, on the other hand, is a
vital standard of strong corporate
governance because it has
– Major immediate impact on
shareholder value
– Long term impact on
reputation/brand and
therefore market share
The Impact on Shareholder Value
After initial reflex (10 days),
market begins to assess
company’s response.
Cumulative Abnormal Returns (%)
 Poor planning can lead to a wide range
of problems, from human casualties
deemed the result of management
negligence to loss of market share due to
unsafe products
Effective Crisis Response
Ineffective Crisis Responses
25
50
75
100
125
150
175
200
225
250
Trading Days After the Event
Source: “The Impact of Catastrophes on Shareholder Value,” Rory F. Knight &
Deborah J. Pretty, Templeton College, University of Oxford, p. 3.
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However, BCM managers continue to have challenges building the
business case for needed plans and capabilities …
Although BCM is a cornerstone of well-structured risk management programs, many
companies struggle to initiate, develop, and maintain needed capability
Typically, this is not because of a lack of interest but a lack of resources, training,
and buy-in from senior leadership
In today’s cost-constrained business environment, BCM leaders must take a take an
actionable approach to protecting value drivers
The customary bottom-up BIA requires an intensive and time-consuming effort to
identify the functions and processes that are truly critical
… as cost pressures and the need to demonstrate immediate
results demand a new way of thinking about BCM Planning
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Our value driver approach to BCM guides BCM capability
development from initiation through exercise and maintenance
Business
Analysis
 Identify critical
products,
services,
functions and
work locations
 Identify key
dependencies
and resources
 Identify key
risks
 Set recovery
objectives
BCM Strategy
Development
Develop
strategies to
address risks
for critical
business
functions &
managed
resources
Identify
initiatives /
actions to effect
strategies
Validate
strategies
through a
workshop
BCM Plan
Development
 Document the
BCM plans
 Develop
options to derisk the
business
through
changes in
three
dimensions—
process,
operating
model, or
geographic
dispersion
 Outline
proactive
initiatives the
business can
take to
improve its
resilience and
to mitigate
identified risks
BCM Plan
Exercise
 Conduct tabletop
exercise to
validate plan
content
 Validate
interdependencies
BCM
KeepProgram
it all aligned
with
the
changing
Maintenance
business
 Keep it all
aligned with
the changing
business
 Conduct
annual plan
reviews /
updates
 Identify a set
of mitigation
strategies
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Business Analysis
Our approach employs proprietary techniques to help BCM leaders
quickly gain traction and sustainable momentum by …
Illustrative High-Level Value Chain
Design
Production
Sales
Production
Operations (Logistics
Engineering
(Logisticsand
andSupport)
Support)
Distribution
Commercial
Administration/
Traffic
Operations
Shared
Shared Services
Services (Legal,
(Legal, IT)
IT)
The value chain allows us to get to the answer quicker by:
Identifying and prioritizing value drivers
Identifying and mapping critical interdependencies
Identifying and prioritizing vulnerabilities and gaps
… focusing resources on protecting the organization’s value
drivers
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BCM Strategy Development
The approach then examines each value driver based on the
impact of a risk, not the cause
Causes
Natural
Effects
Disasters
Unable to
access building
Impacts
Financial
Crisis
Pandemic
Injury or
death
There are infinite disruption scenarios,
but effective planning requires looking
at potential operational impacts
Loss of Primary Facility
Loss of IT Operations
Loss of key
supplies
Reduction of Available Workforce
Loss of
Power
Loss of Key Business Partner
Utility
Outage
Source: BCG Analysis
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BCM Plan Development
The insights gained from the Value Driver Approach are then
incorporated into strategies and aggregated into BCM plans
Analysis
Analysis and
and BCM
BCM Strategies
Strategies

Critical services
services and
and functions
functions
 Critical

Dependencies and
and resources
resources
 Dependencies
Keyrisks
risks

 Key

 Recovery objectives

Strategies to
to address
address risk
risk
 Strategies
initiatives

Initiatives/actions
to effect
 Mitigation
Options to de-risk business
 strategies
- risk
to debusiness
 Options
Strategies
that
drive
change

 Strategies that drive change
Business Continuity Management
INTERNAL USE ONLY
STRICTLY
CONFIDENTIAL
CONFIDENTIAL
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BCM Plan Exercise
The tabletop exercise is a key next step to validate plan content
The tabletop exercise is a discussion-based exercise based on a simulation of
actual disruptions
Because plans are often developed in silos, tabletop exercises allow you to examine
or validate interdependencies
They allow for the free exchange of ideas and provide participants an opportunity to
identify conflicts or areas of confusion within plans, and examine plans and
procedures in a simulated, low-stress environment
They also help to reinforce corporate memory
In today’s cost-constrained environment, a tabletop exercise is also
a low-cost way to energize the BCM program, identify areas of focus,
and drive leadership awareness
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BCM Program Maintenance
The final step is developing a program maintenance strategy to
ensure that the BCM capability remains current in a dynamic
operating environment
 Provides a roadmap for maintaining a
viable BCM capability
 Outlines exercising, maintaining,
enhancing, and managing BCM
capability
 Identifies and documents BCM Program
objectives, resource requirements,
specific actions, and timelines
BS 25999-1:2006 & BS 25999-2:2007
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In summary, the Value Driver Approach offers reduced project costs,
increased development speed, and demonstrated results
By quickly identifying the vulnerabilities associated with the value drivers and
outlining disruption strategies to minimize losses, BCM leaders can focus on
protecting the business
The value-driver approach includes the following key features:
– Maintaining a focus on key functions and processes that drive value
– Engaging senior leadership upfront to promote the BCM program
– Establishing a greater degree of buy-in at functional levels of the organization
– Promoting program efficiency throughout the BCM life cycle
– Generating tangible savings in overall development and maintenance costs
However, the value driver approach’s true value proposition is the ability to leverage
leadership’s experience and insight to quickly identify the important business
resilience issues along with potential solutions
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