Sitting pretty?

Written by David Adams
December 2010

The Government’s Comprehensive Spending Review look set to have a sweeping impact on firms of all shape and size. David Adams asks how that will play out in within business continuity teams and capacities

Whether one views the Comprehensive Spending Review (CSR) as audacious, appalling, or both, there’s no escaping its consequences. But while these momentous changes could affect private sector companies in various ways, how might they affect their business continuity strategies?

At the time of writing, the private sector very much insists it is holding firm. “There’s no impact on us as far as I am aware,” says Steve Mellish, head of business continuity at Sainsbury’s. A spokesperson for energy company Centrica provides a similar statement, as does Stuart Dunsmore, head of business continuity at Commerzbank – but he can see how this might not be the case everywhere.

“We look at transport infrastructure, at utilities, at the infrastructure in the areas around our buildings and the knock-on effects that we might experience and at present our horizon scanning hasn’t identified anything,” he says – adding that he believes this is due in part to the fact that Commerzbank has a relatively small footprint in the UK. Banks and retailers with large high street networks, Dunsmore suggests, should consider how spending cuts and the impact of major national events such as the London 2012 could combine to force a fresh look at continuity planning at some point during the next 18 months.

“The cuts haven’t really affected us on the business continuity side of things,” says Jim Smith, resilience programme manager at Severn Trent Water. “We’re looking to minimise spend wherever we can, but really the only effect we’ve seen is the closure of the Government Offices for the Regions; and those resilience centres will continue elsewhere.”

Roger McLoughlin, business continuity manager at Vodafone believes that if business continuity is deeply embedded in a company’s organisational culture and operational procedures, it should be able to cope.

“At Vodafone we have a team to make sure it’s working, but business continuity is really done by the people out in the business, the operations managers who have had the relevant training,” he says. “We’ve developed quite a sophisticated business continuity awareness course that everyone in the organisation has to go through and at senior management and director level there is an understanding that it’s important.”

For him, the question is tied in with a wider one: the extent to which the recession has affected Vodafone in general and its business continuity function in particular. “There has been a very slight reduction in the business continuity team. However, the numbers of people who now have a business continuity role in the organisation have increased dramatically,” he asserts. “So the health and safety people...business continuity planners and coordinators – there are a lot more of them now.”

Nonetheless, it would be foolhardy to assume immunity to all possible consequences of the cuts. For one thing, the knock-on effects will not become apparent for some time. “It’s probably a little too early for most organisations to fully understand the impacts of the CSR,” says James Crask, senior manager for risk and business continuity at PricewaterhouseCoopers. “There will be some losers. We predicted that smaller businesses are the most likely to, particularly those that rely on public sector contracts. If forced to make efficiency savings they could look at business continuity as an area to cut.

“There’s a distinction to be made between well-established programmes where it will probably be harder for organisations to justify cutting back; and those organisations that may not yet have full support from their board or CEO,” he continues. “But if it is smaller businesses that suffer the most, they’re the guys who don’t necessarily have business continuity in the first place.”

Naturally, all the business continuity professionals interviewed for this article believe that reducing spend on business continuity would be a false economy. There’s also the argument that if an organisation has shed staff, business continuity planning becomes more important.

The private sector organisations most likely to be directly affected by the CSR are those that serve the public sector. Even before the CSR, early public spending announcements made by the Coalition in May 2010 included a 50 per cent reduction in advertising, and freezes on new projects with management consultants and on IT projects worth more than £1 million. In October 2010 research from PwC concluded that 500,000 jobs could be lost in the private sector as a result of public sector spending cuts, with business services and the construction sector set to suffer most.

While outsourcing companies working with government organisations – including, of course, business continuity service providers – will be hurt by these cuts, they could also enjoy new business opportunities, as public sector organisations seek to use outsourcing to cut costs.

As one analyst, Caroline de La Soujeole at Seymour Pierce, put it in May: “a golden age of outsourcing awaits”, with the value of outsourced services for the public sector rising from about £80 billion in 2010 to perhaps £140 billion or more in 2015.

Some private sector companies are reviewing the way they use third party business continuity providers, says Stephen Nuttall, EMEA service continuity leader for business continuity and recovery services at HP Enterprise Services.

“If [clients] say they have to cut some money from their budget we can review the business impact again and have an open conversation about the things that are really critical to the business,” he says. “That is happening, although not as much as you might imagine. In the last couple of weeks we’ve had four or five clients telling us that they’ve got to cut back. People are being asked those questions: some in a sensible way and others in a more arbitrary way.” Nuttall says these clients include both public and private sector organisations but that the arbitrary approach is less common in the public sector.

But it would also be wrong to assume that any such changes will be based on simple cut equals cut calculations. As Andrew Waterston, head of delivery strategy and operations at SunGard points out, some public sector organisations are seeking to avoid making big cuts for short term gains, investing instead in improved processes to become more cost-effective in the longer term.

It’s also possible that public sector organisations might want private sector partners to invest more in business continuity planning, says Rod Ratsma, head of business continuity consulting at Marsh. “A common driver for business continuity management
is that a company working in a supply chain for a larger organisation finds that that organisation wants to be sure it can rely on you,” he says. “So maybe a public sector organisation that finds itself forced to spend less on procurement insurances, say, might apply more rigour to its suppliers in terms of resilience. Especially if the supply chain becomes narrower and dependency on the remaining suppliers grows.”

There may be other, less predictable consequences of these changes, says Tim Astley, principal strategic risk consultant for Zurich Risk Engineering UK: “If outsourcing providers pick up activities beyond their areas of historical competence, that may produce additional areas of risk.”

Private sector organisations that work with the government as part of its civil contingencies strategy may also be affected when the government publishes its response to the consultation on its reference document The Role of Local Resilience Forums, in February 2011. The document was produced by the Civil Contingencies Secretariat in the autumn of 2010, following the government’s announcement in July of its intention to abolish the Government Offices for the Regions, which currently run some resilience and civil contingency functions.

But, as several of my interviewees say, claiming that they want to avoid an old cliché, but finding that there is little alternative: for private sector organisations that find their business continuity planning is affected by government spending cuts these changes represent not just a threat but also an opportunity.

And there are other ways in which government spending cuts could have an impact on business continuity planning and implementation in the private sector. PwC’s Crask mentions ongoing student protests over tuition fees. “There might be new risks associated with civic unrest,” he says. “The UK is a stable environment in which to do business, but there’s no absolute guarantee that will continue to be the case.”

In the end, as always in business continuity, the plan’s the key to success, even if – perhaps especially if – the future looks uncertain. “It’s a question of trying to anticipate what might happen because of the cuts,” concludes Zurich’s Astley. “You need an active review and refresh process for business continuity planning and you need it now, so these things can be picked up in a timely way.”

After all, unlike many of the events that force a rethink of business continuity plans, if the cuts mean you’re feeling the pinch already, or that you could be feeling it soon, at least you can’t say you didn’t see it coming.


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