The benefits of outsourcing production processes or services to suppliers are many: it can provide a better product or service than you would be able to produce internally; it can increase your efficiency; it can allow you to focus on core areas; and, of course, it can reduce your overall costs. Meanwhile, it also creates additional risks companies may not be factoring into their own business formula for success.
Lack of transparency
Suppliers are often reluctant to share information they may see as proprietary or confidential but it’s essential that they give reasonable assurance that they have plans in place for business continuity and that they are regularly maintaining and testing these plans. Their process may include a wide scope of operational dependencies so it’s valid for regular assurance and audits from clients.
Sufficient monitoring and alerts of operational outliers or different-from-expected production or delivery is also a basic requirement. Many clients now require automatic monitoring and timely technical reports. If your organization is not already formally requiring this from your key suppliers, introduce it into your relationship. Conjoined tests and validation exercises are valid trust builders and can improve expectations and transparency in the vendor-client relationship.
Relationships with critical partners frequently begin with a trust or “handshake” agreement on delivering a small service with little risk but develop over time into a critical dependency. When contracts are not fully formed or re-addressed as the relationship matures, both parties can end
It’s a global market and many of your suppliers have their own suppliers – around the globe. In fact, those that are delivering value to your suppliers may be receiving value from you or someone like you. It is a small world, afterall. The key is to understand relationships that are imperative to you and their dependencies. Are several of your vendors relying on the same supplier for a raw material? Do your vendors require the same level of standards you do from their partnerships? There are many layers of business these days and it’s difficult to see the supply chain clearly across several (perhaps as many as several dozen) variables. In short, you need to know your suppliers as well as you know your customers.
Don’t forget that because today’s global supply chains are so interdependent, the number of organizations that influence your product multiplies the complexity of product quality. Each organization carries their own process methodologies, operational policies and strategic initiatives. Each piece of these creates another layer of complexity. It’s easy for a small part to become obscure and the detail less defined, resulting in a poorer level of product. Clear service level agreements and carefully systematized audits are needed to set and maintain standards of quality.
In conclusion, many risks that come with supplier relationships can be minimized through establishing clear expectations early in the relationship and continuing to clarify those expectations throughout the working contract.
Continuity management has long been tied to disaster planning and crisis response as fundamental to emergency planning but the reality is: If you’re just practicing business continuity to survive you’re never going to get much out of it.
The key to effective value creation from continuity management is a strategy that builds on how the day-to-day business is designed to create value. Today’s global market puts us all in crisis. Corporate directors are in jail. Cyber terrorists can easily hide across borders around world yet still access information kept locked away. States and countries declare bankruptcy. Instability is everywhere.
Businesses are so interdependent on one another that supply chain and technology are complex grey zones of value and accountability. The bottom line is the business needs to create value to survive. Maybe value means money, maybe it’s customer satisfaction or maybe it’s serving its nonprofit goal. Regardless, the creation of that value must be the crux of your resilience plans.
One of the most common misconceptions of business continuity planning is that it starts with a disaster and in a lucky world no one would need a plan. Luck favors the prepared. A business with a healthy continuity management program doesn’t just survive crisis; it thrives daily. The reality of the business world is that every day is more complex and risk loaded. In order to work toward corporate maturity and institutionalization of the systems that create value you have to structure and live your plan.
Think again! So many companies these days think it’s a good idea to let technology get behind the wheel of business or business recovery. This is not going to move you forward. Business is about people and systems. If you happen to have a computer to help with one of those systems, fine, but don’t let that computer boss you around and don’t EVER start thinking that computer cares about you or your company. It doesn’t and it never will.
Likewise, there’s a strong trend to push business decisions on to the people who care for the computer. They are fantastic people and they help you get what you need. You may even get to feeling like they are indispensable because they are always saying things like, “We are working on that now”. Or they make your iPad work after you screamed at it and threatened to throw it out the window. Your tech team may be working miracles but they still can not run your business. Put them back in their car seat and get back to driving!
Sitting in a top level Management of Information Systems conference this morning with over 60 CIOs from local corporations the panel discussion started and ran on BYOD for over 90 minutes. This is a hot topic and ambivalence, though not overt, is a clear theme. Though corporations see benefits from decreasing overhead and IT inventory to employee satisfaction the risk possibilities around data security are unrealized.
Issues that arose included:
– separation of hardware from software systems
– new data and cyber policies
– data security systems and controls like management and wiping capabilities
– distinguishing or categorizing personal vs corporate data
– policy enforcement
– user safety during equipment use
– privacy concerns for employees
– device support
It will be interesting to see how this opportunity develops and what evolutions arise to support it’s progress. What are you seeing in your organizations?
I just finished an excellent book on driving change in business: Neil Smith’s “How Excellent Companies Avoid Dumb Things”
Here’s the 12 principles that cut through the barriers:
- The CEO must personally lead and support and change process carried out across the entire organization and a majority of senior management must also support it.
- The entire organization must be engaged in the change process.
- The project must be guided by “stars” who are willing to change the status quo.
- There must be no up-front targets for the company as a whole or the individual departments within it.
- Those who will implement the idea must own the idea.
- It must be easy to put ideas into the change process but hard to remove them.
- Consideration of ideas must be based on facts and analysis, not opinion.
- Consensus must be built.
- There must be a focus on increasing revenue, not just reducing expenses.
- The change process must not disrupt normal business.
- Implementation must be nothing less than 100 percent.
- The change process must be about culture change, not just a completed project.
Smith is right, constructive change that you want to see in your business is going to begin at the top and must be measured and deliberate. Don’t mistake success for luck. It’s not going to come easy!
From DCS Planning’s partner CoreXchange Colocation Services:
CoreXchange deeply admires companies like DCS Planning that provide well-crafted solutions that protect businesses and organizations from painful and deeply damaging data loss.
Every company should have thoughtful, thorough business continuity and disaster recovery plans like the ones offered by DCS Planning. Every company needs to invest in risk assessment and a business impact analyses — again, just like the services offered by DCS Planning.
But every expertly crafted disaster recovery and business continuity plan needs to be built upon a cutting-edge, fault-tolerant network infrastructure that’s ready to withstand the digital age’s most nefarious elements.
Colocation provides a multitude of elements — including hardened space, highly managed environmentals, power & cooling, physical security, and connectivity to telecommunications and network service providers — to better protect and manage companies’ servers and networking equipment.
For example, CoreXchange’s data centers are supported by state-of-the-art power systems featuring redundant 1.5 MQ generators and four 500-ton chillers. This nearly eliminates the possibility of electrical downtime and gives us tight control over the internal environment. We also leave no stone unturned when it comes to security: Our center includes perimeter fencing, 24/7staffed check-in station with mantrap, and internal and external video surveillance.
Colocation with CoreXchange along with a solid plan from DCS Planning can be the bedrock on which your company’s data security, viability and peace of mind rests.
Yes, for the next year or two your bank examiner may make the mistake of crediting you for exercising your disaster plan when you documented an actual crisis but let’s take a step back and think about this before we consider it a “win”.
Experiencing a crisis or disruption does not meet the standard for exercising your plan and should not be adequate to count as testing your plan for many reasons. Including:
- Under best practice continuity management guidelines it is clear that establishing and testing an exercise program is not the same as documenting events that threaten or impact the business. These are two separate best practices.
- FFIEC examination guidelines state “The board and senior management should establish a testing program appropriate for the size, complexity, and risk profile of the organization and its business lines”. Passively experiencing crisis does not demonstrate a testing program has been established and, no matter what the extent of the crisis, will it be appropriate for the size, complexity and risk profile of the organization. In fact, it may be counter productive and make you look unprepared because you didn’t plan a test.
- Community banks are likely to have experienced 6-12 crises in a year. What makes this one particularly meaningful? Did you document the other ones? What are your standards for documentation?
- Test objectives were not set or met (no, “survival” does not count) and only one part of your response plan was tested. The “test” was not comprehensive.
- Since you weren’t planning to experience this problem, exercise controls were not in place when you had it. You can only manage what you measure.
- Hypothetically, would you consider going to the emergency room because you thought you might be having a heart attack to be an indicator for your ability to deal with stress? Technically the answer is “Yes”. However, that’s certainly no way to live and if this is your common practice then it indicates you don’t really have a good plan for your health. The same is true for your organization. Why have a heart attack to wait to check and see if your blood pressure is too high? It’s easier to use a blood pressure cuff and check your heart rate.
Let’s speak the truth: This is not the attitude of a healthy, mature business and will not, for much longer, meet requirements for safety and soundness.
Now, before you get frustrated, I realize you don’t want to do continuity management this way. You have a LOT on your plate that you’d rather be getting to (call reports anyone?) and you’re just not sure where to get started. So, DCS has set up some fantastic tools to make planning exercising EASY for you! Get excited now and bookmark this for future reference! First, go ahead and log that problem you had on our FREE Crisis Event Log. It’s got a couple of brief questions to help you get down the information you need to learn from and properly document the problem.
Next, use our FREE Strategic Road Map to get an idea about what a good, well-rounded financial institution can do on to build operational strength. NO, you don’t have to do that big fail-over test right away. We actually recommend against it. Start drilling the little things first. Can you guarantee that you can contact everyone when they’re not at work? Try your call tree out and write down what happens. That’s a great test!
Another quick tip is to see what your IT provider is doing to test regularly. We often find out the IT department regularly tests failover procedures but rarely documents it adequately for oversight or examination requirements. All you have to do is start documenting! It’s easy! You can do that!
We have also started a new product line: DIY Turnkey Continuity. We’re building very strong key kits for your continuity tool case at affordable prices. We’ve started with a data breach kit and will be releasing an exercise kit before the end of the summer. For our BOL friends, we are looking for pilot users to test these at a discounted rate! Private message me if you’re interested. Also let me know what other kits you’re interested in. Pandemic, social media and vendor management are on our list for 2013.
I hope these ideas help out. We realize you are doing everything you can to keep compliant and the business moving in a positive direction. Please let us know what else we can do to make your job easier!
Many executives ask themselves: “I know the basics about critical processes and mission-critical systems but what can I do to really make a difference in our ability to consistently exceed our customer’s expectations?”
One way is to focus on increasing your business value and to sustain that value regardless of expected or unexpected circumstances. Below are 10 planning actions that you can take to support your mission critical value proposition.
10. Don’t be satisfied with a computer backup plan. When your clients ask what’s the #1 reason they should use your company, do you say it’s your technology? Probably not. Why are you relying on technology to save you in a disaster?
9. Ask questions. What are your employees doing in their personal lives for emergency readiness? What are their concerns? How can you help them?
8. Talk about operational risk and continuity management in business strategy meetings. Talking is the first step to integrating it into the corporate culture.
7. Don’t count on vendors to pick up your slack in an emergency. If it’s not written into your contract don’t put it in your plan. Even then, always have a backup plan.
6. Know when to say there’s a problem. Chances are you’re not going to be the one to first notice something is wrong. If you are ignoring business deficiencies, others are too.
5. Know your emergency response plan. Every natural hazard has a professional group that monitors it and knows how to respond. The response plans are usually free online. Get a good plan for the basic natural disasters in your area. Keep it simple and your bases covered.
4. Don’t focus on the fear. It’s easy to look at the unlimited disaster scenarios and get overwhelmed. Instead look at what’s really important – a strong business plan.
3. Make a list of what is really important to your business. Keep it short – not more than ten points (tops!). Share it with everyone – your boss, your employees, your clients, your partners.
2. Build relationships with three key responders. This could be your local police department or a critical vendor. The point is being on a first name basis with the person who has the answers you’re going to need during your emergency.
1. Create a solid employee communications plan and test it quarterly or more often. People are your greatest asset; know how to connect with them. Set standards and make them clear.
Still unsure or need help developing a road map to make your path simple? We’re here for you. Call now for a free consultation. 888-297-PLAN
Operational risk has eclipsed credit risk as national banks’ chief safety and soundness challenge, Comptroller of Currency Thomas Curry told the Exchequer Club in Washington, D.C., last week.
Operational risk – the risk of loss due to failures of people, processes, systems and external events – is “high and increasing,” Curry said. He cited flawed risk models, lack of adequate controls over third party vendors and anti-money laundering efficiencies as some examples of operational risk.
“[A]s banks and thrifts face greater resource constraints and higher compliance costs, they may feel greater pressure to economize on systems and processes in order to enhance their income and operating economies …,” Curry said. “All institutions … must resist the temptation to under-invest in the systems and controls they need to prevent greater risk and larger losses in the future.”
He emphasized the risk of operational failure is embedded in every activity and product – from a bank’s processing, accounting and information systems to the implementation of its credit risk management procedures.
“No issues look larger today than operational risk in all its dimensions, the manner in which all risks interact, and the importance of managing those risks in an integrated fashion across the entire enterprise,” Curry said. “These themes are a supervisory priority for us at the OCC today and they should similarly command the attention of the industry.”
reprinted from the Oklahoma Bankers Association Weekly Update, May 21, 2012
It might be an auto repair shop washed away by a flood. A dentist’s office scorched by a fire. A dry cleaner hit by a tornado. A pet store frozen by an ice storm and power outage. There are lots of sorts of businesses, and lots of kinds of disasters, but one thing remains the same: businesses disrupted by disaster permanently close their doors at an alarming rate. In fact, according to the Insurance Institute for Business and Home Safety, one in four small businesses closed by a disaster never re-opens.
So, when the unthinkable happens, will you be prepared to lead your business through the crisis? Preparedness is the key! By creating a disaster recovery and business continuity plan, your business can increase its recovery capabilities dramatically. A plan can help you make the right decisions quickly, cut downtime, and minimize financial losses. It can even help you avoid certain disasters through planning and mitigation measures.
The prospect of creating and implementing such a plan can be daunting, but business leaders in Tulsa have a unique opportunity to get a head start on the process by attending A Day Without Business, a business continuity summit hosted by Tulsa Partners’ Disaster Resistant Business Council.
A Day Without Business will take place on Thursday, March 15, 2012 from 9 a.m. to 3:30 p.m. at the Holiday Inn – City Center in downtown Tulsa. Registration is open through March 2, online at www.tulsapartners.org or by phone at 918-632-0044. The cost for the one-day event is $65, and space is limited.
The event’s opening speaker will be Tulsa Chamber of Commerce President and CEO Mike Neal. The luncheon keynote speakers will be Rob O’Brian and Tonya Sprenkle, President and Vice President of the Joplin Area Chamber of Commerce, who will share about their Chamber’s experience with the May 2011 Joplin Tornado.
The lead sponsors for A Day Without Business are Tulsa Partners’ Disaster Resistant Business Council, State Farm Insurance, TRC Disaster Solutions and Williams. Other participating organizations for the event include the Insurance Institute for Business and Home Safety, Titan Data Services and the Tulsa Health Department.
For more information about A Day Without Business, contact Tulsa Partners at 918-632-0044, firstname.lastname@example.org, or www.TulsaPartners.org.
Written by guest blogger Jessica Hill