Business Contingency Business Contingency PlanningPlanning

Presentation By:Presentation By:

Sheldon E. SpackmanSheldon E. Spackman

What Will Be CoveredWhat Will Be Covered

• Business Contingency Planning a Business Contingency Planning a DefinitionDefinition

• How B.C.P. Can Be AppliedHow B.C.P. Can Be Applied• Tools To Make It Work Tools To Make It Work • A Real World ExampleA Real World Example• Sit Down and Try ItSit Down and Try It• SummarySummary• Readings List Readings List

Business Contingency Business Contingency Planning A Definition Planning A Definition

A Proactive Executive Command A Proactive Executive Command Crisis Management Program, Crisis Management Program, Driven By Business Requirements, Driven By Business Requirements, To Control Any Significant Impact, To Control Any Significant Impact, Either Positive Or Negative, On An Either Positive Or Negative, On An Organization. Organization.

Contingency Planning Can Contingency Planning Can Be Applied To:Be Applied To:

• DisastersDisasters• CompetitionCompetition• Missed ForecastsMissed Forecasts• RecoveryRecovery• Critical Vendors loss (Sole Sourcing)Critical Vendors loss (Sole Sourcing)• New ProductsNew Products• A Critical Customer LossA Critical Customer Loss• Computer Failure/Data LossComputer Failure/Data Loss• Significant EventsSignificant Events

Applying Contingency Applying Contingency PlanningPlanning

• LeadershipLeadership• PreplanPreplan• No Plan = Decision FlurryNo Plan = Decision Flurry• Can’t Plan For EverythingCan’t Plan For Everything

What Events Should Contingency What Events Should Contingency Planning Be Confined To?Planning Be Confined To?

Events That:Events That:• Cannot be foreseen Cannot be foreseen • Cannot be supportedCannot be supported• Are beyond reasonable control Are beyond reasonable control • Exert a significant impact Exert a significant impact • Are based on major assumptions Are based on major assumptions

that prove invalidthat prove invalid

Tools To Make It WorkTools To Make It Work

• Fast Feedback Fast ResponseFast Feedback Fast Response• ZZB PrinciplesZZB Principles• Best, Worst, and Most Likely CasesBest, Worst, and Most Likely Cases• Steps in Contingency PlanningSteps in Contingency Planning

Where to StartWhere to Start

• Upper management commitmentUpper management commitment• Company resources committedCompany resources committed• CommunicationCommunication• ReviewReview• FeedbackFeedback

Types Of FeedbackTypes Of Feedback

• Competitive IntelligenceCompetitive Intelligence• Customer ResearchCustomer Research• External Environmental ScanningExternal Environmental Scanning• Monitoring Major Business Monitoring Major Business

Assumptions Assumptions • Financial AnalysisFinancial Analysis

Zero Based Budgeting and Zero Based Budgeting and PlanningPlanning

•Budget PlanningBudget Planning•90%, 100%, 110% 90%, 100%, 110% •Reactions Pre-plannedReactions Pre-planned

Best Worst Or Most LikelyBest Worst Or Most Likely

• List and define all variables List and define all variables • Best assumptionBest assumption• Most likely assumptionMost likely assumption• Least likely assumptionLeast likely assumption

Steps of Contingency Steps of Contingency PlanningPlanning

1.1. IdentifyIdentify

2.2. EstimateEstimate

3.3. FormulateFormulate

4.4. Develop PlansDevelop Plans

5.5. Establish Feedback MechanismEstablish Feedback Mechanism

6.6. Develop Schedule of ResourcesDevelop Schedule of Resources

7.7. Pro-forma FinancialsPro-forma Financials

8.8. Designate peopleDesignate people

Possible Internal Possible Internal Significant EventsSignificant Events

• Replacing a CompetitorReplacing a Competitor• Overly Optimistic Sales ForecastOverly Optimistic Sales Forecast• Sales of New ProductsSales of New Products• DisastersDisasters• Technological/Product ObsolescenceTechnological/Product Obsolescence• Major Assumptions (In company plan)Major Assumptions (In company plan)• Contingency Reserves ($$$$$$$$$$)Contingency Reserves ($$$$$$$$$$)

External Primary and External Primary and Secondary InfluencesSecondary Influences

Wilson Churchill StatedWilson Churchill Stated

““Plans are useless, but Plans are useless, but planning is useful.”planning is useful.”

Hints For Getting StartedHints For Getting Started

• Don’t Start LargeDon’t Start Large• Make a universal (non specific) Make a universal (non specific)

planplan• Identify alternativesIdentify alternatives• Make plan flexibleMake plan flexible

A Real World ExampleA Real World Example

Simmons and Clark Jewelers Simmons and Clark Jewelers Detroit, MIDetroit, MI

Detroit and NYC BlackoutDetroit and NYC Blackout

Simons and Clark JewelersSimons and Clark Jewelers

Employee’s Followed Established Employee’s Followed Established Store Security PlanStore Security Plan

1.1. Closed all external gatesClosed all external gates

2.2. Locked all doorsLocked all doors

3.3. Took care of all customersTook care of all customers

4.4. Put away merchandisePut away merchandise

Sit Down And Try ItSit Down And Try It

Let’s Plan a trip to drive to the store.Let’s Plan a trip to drive to the store.

What could go wrong? What could go wrong?

(Confine Events)(Confine Events)

Assign ProbabilityAssign Probability

• Red = High ProbabilityRed = High Probability• Yellow = Middle ProbabilityYellow = Middle Probability• Green = Low ProbabilityGreen = Low Probability

Trip To The StoreTrip To The Store

• Major Assumptions?Major Assumptions?• Action Plan? Action Plan? • Monitoring? Monitoring? • Resources? Resources? • Person doing it?Person doing it?

Contingency Planning Contingency Planning SummarySummary

• Starts With Good LeadershipStarts With Good Leadership• Needs ResourcesNeeds Resources• Will Not Be 100% On TargetWill Not Be 100% On Target• Must Be AdaptableMust Be Adaptable• Start SmallStart Small• Use Tools To Guide ProcessUse Tools To Guide Process• Must Be ReviewedMust Be Reviewed

Readings ListReadings List

• Herriott, Larry CDRP.(1997). “Business Herriott, Larry CDRP.(1997). “Business Contingency Planning Is…” Disaster Recovery Contingency Planning Is…” Disaster Recovery Journal. Journal. ©Systems Support, Inc. ©Systems Support, Inc. Retrieved, Retrieved, October 5, 2003, From, October 5, 2003, From, http://www.drj.com/newdr/w3_006.htm http://www.drj.com/newdr/w3_006.htm

• McConkey, Dale D. “Planning for Uncertainty”, McConkey, Dale D. “Planning for Uncertainty”, Business Horizons, Jan/Fed 1987. vol. 30, Issue Business Horizons, Jan/Fed 1987. vol. 30, Issue 1, pgs 40-45.1, pgs 40-45.

Readings ListReadings List

• ““Business Continuity/Disaster Recovery Business Continuity/Disaster Recovery Lessons Learned from 9/11/01 – A Panel Lessons Learned from 9/11/01 – A Panel Discussion”. Retrieved October 5, 2003, from Discussion”. Retrieved October 5, 2003, from http://www.drj.com/groups/mcpf/0802minutes.http://www.drj.com/groups/mcpf/0802minutes.htmlhtml

• Green, Barbara. “Emergency Plans and Green, Barbara. “Emergency Plans and Employees’ Team Spirit Make Blackout Minor Employees’ Team Spirit Make Blackout Minor Inconvenience for Retailers”, From National Inconvenience for Retailers”, From National Jeweler, 00279544, 9/16/2003, Vol. 97, Issue Jeweler, 00279544, 9/16/2003, Vol. 97, Issue 1818

Readings ListReadings List

• Westhoven, Sgt. 1st Class Kryn, “Medal Westhoven, Sgt. 1st Class Kryn, “Medal Awarded to Retired Army Reservist Who Died Awarded to Retired Army Reservist Who Died in WTC”. Retrieved, 10/05/2003 from. in WTC”. Retrieved, 10/05/2003 from. http://.army.mil/usar/news/2002/06june/rescorlhttp://.army.mil/usar/news/2002/06june/rescorla.htmla.html

• Kite, Shane. “Blackout Inspires Cutting-Edge Kite, Shane. “Blackout Inspires Cutting-Edge BCP Innovation”. Securities Industry News, BCP Innovation”. Securities Industry News, Volume XV, Number 36, Monday, September Volume XV, Number 36, Monday, September 15,200315,2003

Readings ListReadings List

• Sapriel, Caroline. “The People Dimension of a Sapriel, Caroline. “The People Dimension of a crisis”. Strategic Communication Management, crisis”. Strategic Communication Management, Apr/May2002, Vol. 6 Issue 3, p6Apr/May2002, Vol. 6 Issue 3, p6

• Sapriel, Caroline,. “Effective crisis Sapriel, Caroline,. “Effective crisis management: Tools and best practice for the management: Tools and best practice for the new millennium”, From Journal of new millennium”, From Journal of Communication Management, February 17, Communication Management, February 17, 2003 Vol.7,4 pgs.348-355. Henry Stewart 2003 Vol.7,4 pgs.348-355. Henry Stewart PublicationsPublications

Readings ListReadings List

• Cholbi, Wendy. “Contingency Planning: What Cholbi, Wendy. “Contingency Planning: What Every Director Should Know” Bank Director, 1st Every Director Should Know” Bank Director, 1st Quarter 2002, pgs. 36-46Quarter 2002, pgs. 36-46