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18 February 2020

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Coronavirus and its potential effect on your business

As Coronavirus shows no signs of slowing, its wider impact is beginning to manifest itself commercially across the globe:

  • Alibaba are reporting delivery delays and near-term challenges for the business
  • JCB are reducing production due to reduced parts supply from China
  • Oil prices are falling as China, the largest consumer of oil, reduces consumption
  • The financial markets are reacting to the uncertainty around oil and mining stocks

Coronavirus is being labelled a Black Swan event, that is “an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences”. Black Swan events are characterised by their extreme rarity, their severe impact and the practice of explaining widespread failure to predict them as simple folly in hindsight.

Without the right measures in place, your business may be vulnerable to unconsidered events, such as Black Swans. So how do you cater for such an event in your Business Continuity Planning?


Business Continuity Planning

One way to approach business continuity is to start your process by understanding your business’ “Maximum Tolerable Period of Disruption” (the point at which the business becomes irreparably damaged due to its inability to deliver products / services), the key assets and resources you need to deliver your products and services and the timescales within which you can reinstate these assets/resources.

By looking at the ability/timescales to recover the assets/resources and comparing this to the Maximum Tolerable Period of Disruption and the levels of the asset/resource you need, you can establish Recovery Time Objectives for these and then identify where business continuity arrangements need to be developed.

This process is known as Business Impact Analysis (BIA) and it is an essential component in the business understanding of what its continuity needs are. If you have not established that after 10 days of non-service delivery you have lost 50% of your customers and after 25 days exhausted your cash reserves, then you may be building a BCP that doesn’t protect the business.

In the supply chain this may mean running dual suppliers that are in geographically diverse locations. This is particularly relevant in China where towns tend to focus on a single product area. Yes, there may be costs involved for example duplicate tooling, but it provides commercial leverage and resilience.

Similarly, if you consider your workforce as a key asset/resource, in an event such as Coronavirus you need to understand how to resource the business if there is a loss/partial loss of workforce, then whether it’s a lottery win or pandemic you are protected.

This approach to Business Continuity Planning is focused on the ability to reinstate your assets/resources, regardless of the event rather than specific events and as such help you mitigate the Black Swans as much as possible. You can’t plan for everything, but you can plan for anything.


For more information on Business Continuity Planning, please contact Keith Marlow on 020 7330 8756. Alternatively, click here for more information.