Worst-case scenarios: certain threats can't be controlled, but most aren't as unmanageable as you might think. Ruth Prickett checks out the systems that allow firms to act on the early warning signs and plan a rapid response should disaster strike.
| Author | Prickett, Ruth |
There's an old joke about two men confronted by an angry lion. One stops to put on a pair of trainers. When the other tells him that they can't possibly outrun a lion, he replies that he doesn't need to--he only has to outrun his friend. The message is relevant for any company facing an uncontrollable external threat. It could be the emergence of a huge new competitor, a political upheaval or a fundamental shift in the marketplace. It could also be an "act of god" such as hurricane Katrina and its effects on, say, oil prices or consumer spending.
The global economy has endured rising oil prices and a series of natural disasters in the past six months, so it's hardly surprising that Ernst & Young reported a 29 per cent increase in the number of UK profit warnings between 2004 and 2005. The sectors issuing the most warnings included support services, retail, engineering, insurance and computer services.
It's hard to blame a business for not predicting the unpredictable, but, if a disaster strikes, there are ways to ensure that it isn't affected as badly as its competitors. There are also software tools that will help--although even the best ones aren't much use unless the right business processes are in place.
According to Laurence Trigwell, senior financial services industry director at Cognos, there are two levels of response to this kind of threat. "The first is to monitor warning tremors in the marketplace; the second is to have processes in place to handle a truly unpredictable event," he says.
Trigwell argues that too many firms claim that a disaster was unforeseeable when the warning signs were in fact there. He likens this to watching a line of beacons being lit and acting only once the one directly above you is burning.
"They often say something was unpredictable because they didn't record their concerns early enough, or because the local manager who saw the signs had no process to report them," he says. "If a local manager in a retail chain knows that a bypass is being built or an out-of-town mall has planning permission, he needs to know whom to talk to, and to believe that there will be co-ordinated response. He also needs the authority to act."
To achieve this, a company needs a system that can model different scenarios; empower front-line staff, who usually detect such tremors; and help the organisation to react at all levels. When it comes to truly unpredictable events, the system should enable the firm to identify the areas...
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