The SEC BCP Report Card: What Do You Think?

Not All Threats Can Be Avoided, But Damage Can Be Minimized

A recent program under the SEC examined the ways that some businesses were well-prepared or ill-suited to withstand a natural disaster by investigating several corporations in the aftermath of last year’s Hurricane Sandy disaster. As many companies know, especially those in areas of finance, a company’s losses or damages during a natural disaster are not valid enough reason to interfere with their clients’ investments; the SEC looked into the BCPs of several affected companies to determine areas of improvement or need.

Areas of Concern in Corporate BCPs

The results the SEC found that caused the greatest concern were among companies whose immediate emergency plans did not allow for a long-term shut down due to a natural event. While many companies were prepared for an immediate event that caused minor delays, events such as Hurricane Sandy left many area residents and businesses without basic utilities for well over a month. BCPs need to incorporate a company’s plan for missing employees or loss of business effectiveness for long periods of time while rebuilding or vital restructuring occurs.

The recent flooding in Colorado, by way of example, has caused extensive damage to roads, bridges, and highways; this type of damage will have a long-reaching impact on day-to-day business operations for companies in the affected storm area. Those businesses need to have effective plans in place to continue their operations until repairs can be made.

Future Planning for Widespread Catastrophe

One of the key recommendations SEC advisors made to the businesses surveyed was to make realistic plans based on evidence-driven events. These plans can be built to include widespread disasters with lengthy repair times, and there is already a sufficient source of prior events to help guide businesses in producing acceptable long-range emergency protocols. While many businesses already plan for the need to use an alternative site with back-up operations equipment, what most companies failed to do was plan for these solutions for the long term, extended periods.

Many companies had also prepared for backup locations but failed to plan for the loss of manpower resulting from a catastrophic event, especially in instances where travel to an alternate location was not possible due to damage to city infrastructure. This level of damage can take months to replace, which is time that a company would be without its crucial manpower.

 

Reference:
http://www.sec.gov/about/offices/ocie/business-continuity-plans-risk-alert.pdf