Increase in unplanned power outages highlights importance of business continuity plans

Negative effects of power outages being experienced by all industries

July 31, 2012

With the spate of unplanned power outages showing no signs of abating resulting in the negative effects of power outages being experienced by all industries, local businesses are being urged to implement an effective Business Continuity Management Program (BCM) in order to ensure no further financial losses are suffered. 

This is according to Ray Stride, Managing Director of Global Continuity South Africa – a group company of JSE-listed Metrofile Holdings Limited – who says that power outages are the second leading cause of business interruption in South Africa and account for approximately 14% of cases. “As a result, effective BCPs are becoming increasingly critical to local business survival and ultimately the growth of the economy.”

Electric power outages cost American business $80 billion every year, according to the Lawrence Berkeley National Laboratory. While there are no local statistics, this extremely high figure highlights the massive cost power outages can cause, further cementing the need to take adequate precautionary measures to avoid additional financial consequences.

Stride says the main function of a sound BCM plan is to enable a business to avoid disasters or survive and continue functioning at a sustainable level following a major disruption to critical daily operations. “This is done through the identification of certain businesses processes that must be recovered within a certain time frame in order to continue supplying critical products and services during adverse operating conditions or alternatively to ensure that business processes are not interrupted by disastrous events.” 

“The repercussions for businesses with no effective BCM solution can range from loss of revenue, assets, clients and staff to litigation, penalties and perhaps even worst of all, reputational damage. There are also personal consequences for the business leaders as they could face Director or Officer liability cases on the basis of negligence or criminal liability, which could even affect their reputation to act as a Director in future.”

Stride says some examples of essential services and activities, which are critical to the sustainability of a business include, but are not limited to: revenue collection; communication with staff, suppliers and clients; service delivery; logistics and procurement.

“Unfortunately, no insurance policy is able to keep a business running – it can pay for damages caused, but it cannot answer the phones, communicate with clients or satisfy stakeholders when a major unforeseen interruption renders the business incapable of continuing mission critical activities.”

However, the importance of testing the BCP cannot be stressed enough as a recovery plan is only effective if it is certain to work, says Stride. “Testing is the key activity which determines, firstly whether the implementation of the BCP has been worth the effort and expenditure, and, secondly how to address those issues which inhibit effective recovery.”

“In a time when disruptions to business operations can occur at any moment, all businesses have a responsibility to clients, employees and stakeholders to ensure a tested plan is in place which allows the organisation to continue functioning at an operational level even in the event of a disaster,” concludes Stride.