SMEs must guard against external shocks

Local companies, especially small and medium-sized enterprises (SMEs), must look beyond existing insurance covers and disaster recovery plans and put in place an effective business continuity management plan that will shield them against risks and other unexpected external shocks, says David Brocke, PwC's Director of Risk Assurance Services.

Speaking at a business breakfast meeting to create awareness on how businesses can be positioned to become more resilient and sustainable in the wake of turbulence and other business-related risks, he said it is highly important for business managers to always be on the lookout for potential threats to their business and act to mitigate their occurrence.


He said companies that have disaster recovery plans and insurance cover are better-placed because such companies can get some money back to be in business; but preparing the business to become more resilient and continue to be in business after experiencing turbulence or shocks is better because it will increase clients and stakeholders confidence and belief, and also add to the company's bottom-line.


"There are numerous possible threats to businesses, both natural and human; such as fire outbreaks, flooding as well as fraud and epidemics. We also have technical threats; mostly accidental explosions, structural failure of buildings, telecoms failure and toxic spills.


"The most exposed are SMEs and local businesses who tend to think that mitigating risk is only about insurance and the availability of disaster recovery plans. Big companies tend to be aware of the need for business continuity management because they are exposed to the foreign markets, and also some of them are multinational: that means such decisions are taken at the centralised level.


"Insurance will pay you back some money to be in business, but will that sustain the company and win back the confidence of clients and stakeholders? It is therefore imperative for SMEs to employ business continuity management processes to cushion their operations," he told B&FT in an interview.


Mr. Brocke said business resilience is an ongoing process, for which reason business continuity management plans need constant updates to fit needs of the prevailing environment -- adding that the most worrying is when some companies are aware of the potential shocks but fail to develop mechanisms to curtail their occurrence.

"There are various levels of awareness regarding the need for business continuity management. Aside from those who think they are safe under insurance cover and also have in place disaster recovery mechanisms, there are also those who think that their operations are backed by IT infrastructure.


"The issue is even those businesses are sometimes exposed to these threats but treat them with a 'business as usual approach', and therefore expose their businesses to shocks and risks," he said.


Thomas Keegan, PwC's Enterprise Resilience Leader for the Middle East, backed the argument for business resilience: saying it is more costly when businesses fail to plan against risks as such failures usually come with loss of staff and assets, loss of reputation and supply, as well as infrastructural disruptions.


"Business resilience allows companies to bounce back from failure and still be able to run profitably; it is basically about an organisation's ability to adapt and evolve in a changing environment, seizing opportunities and protecting shareholder perception.”


He said for an effective business resilience plan, management must address the core disciplines of enterprise risk management, crisis management, and business continuity management.