Eskom power outages threaten local business continuity in winter

Eskom’s warning that the risk of unplanned power outages remains high presents significant challenges for most local businesses.

April 30, 2013

Eskom’s warning that the risk of unplanned power outages remains high presents significant challenges for most local businesses which are reliant on a steady source of power in order to continue operations, particularly ahead of the winter months when energy usage typically soars.

This is according to Ray Stride, Managing Director of Global Continuity South Africa – a group company of JSE-listed Metrofile Holdings Limited – who says businesses must implement an effective Business Continuity Management (BCM) Programme in order to ensure financial, reputational and legal repercussions are avoided. “According to Global Continuity data gather over 20 years, power outages are the second leading cause of business interruption in South Africa and currently account for approximately 14% of cases with this percentage likely to rise in light of Eskom’s warnings.”

Power fluctuations can also lead to damage of critical company data, which gives rise to another leading cause of business disruption known as data corruption which accounts for approximately 9% of business interruption cases in South Africa, says Stride. “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 business 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.