Entries tagged with “business Risk Management”.


It is confirmed that Grimsvotn volcano in Iceland has erupted sending a plume of smoke and ash several thousand feet into the air.

In the past, this has not been a major issue, and air traffic was routed around a 120 nautical mile no fly zone. However, you may recall the challenges that many fliers to and from Europe encountered last year when another Icelandic volcano belched smoke and ash that was pushed to many of the major air hubs in Europe, slowing or stopping many flights and disrupting the flow of goods through the supply chain.

Hopefully the last time served as a wake up call to develop contingency plans to assure the smooth operation of your business.

One of the benefits of hind site in unexpected natural disasters is the opportunity to create a “lessons learned” document. By looking at the “pain points” that your organization encountered during the incident, you have the ability to develop contingency plans. 

What are some  common pain points?

  • Key personnel out of position due to transit delays
  • Inventory shortage levels due to interruption of supply chain
  • Increased costs due to spike in demand
  • Delayed deliveries
  • Decreased cash flow
  • Cancelled orders

I take a rather different approach to developing contingency plans by working backwards from the pain point (impact on the company) to the triggering effect.  So rather than looking at “Volcanic Activity in Iceland” as the starting point, I look at “delayed deliveries”. 

Why are there delays?  when brainstorming the reasons, think globally before locally.  

  • Limited shipping lanes
  • Lack of containers
  • Insufficient inventory
  • Lack of key components

Then ask Why?

Lack of containers -

  • Increase in demand
  • Not located where shipments are happening
  • Not being unloaded

Why?

Not being unloaded -

  • Customer using as free “warehousing space”
  • Dock strike at key receiving port
  • Unexpected inflow at key receiving point
  • Shipments aren’t moving  out of a shipping point

The why question asked 4 - 6 times will typically  drill down to a root cause, and root causes can be addressed by either establishing an alternative, or correcting the challenge to remove the obstacle.  They key is to not drill so deep that a plan must be generated for each possible reason, after all doesn’t a solution for delayed deliveries because of a volcano in Iceland require the same process steps as a dock worker’s strike in Los Angeles?  In both instances you would look at alternative transportation routes (perhaps moving the product from Frankfort to Madrid, depending on how the wind blows, or re-directing the container to Seattle from LA to get product into the country and stores quicker), or services (moving by ocean from Europe vs. air freight, or air freight from China to LA) and measure the cost and service impact against the cost and service impact for waiting out the obstacle.

The important idea here is to have a contingency plan for those items that may have a serious impact to your business, otherwise you may just erupt like Grimsvotn.

If you are like most companies, employees are travelling all over the city/state/country/world making sure your business continues to grow.  You probably have given very little thought to the risks that are associated with travel, not only in getting to the destination and back, but the risk at the destination itself.

Hopefully you have set policies that limit the number of executives that can travel on the same plane or in the same car  so in the unlikely case of an accident that can kill or injure the occupants, the company can continue operating at a high level.  You also should have policies in place which limit the use of cell phones and texting while driving.

Other parts of managing the travel risk are often considered reactive rather than proactive.  Travel incidents such as: 

  • medical emergencies
  • theft
  • kidnapping
  • civil unrest
  • natural disaster
  • terrorist activity

Fortunately there are steps to take which can help educate the employee to be aware of these issues where they are travelling and take steps to minimize the chance of it happening. 

Usually the risks we look at have a very remote chance of occurring, and while the impact can be anything from something small where the impact annoyance and delay to something with major impact to the employee and the company.   If one of these events does happen, it truly is a reactive process, one that has already been carefully thought out and a contingent plan established that will address the situation quickly, calmly and professionally.

In some instances however, the risk can be predicted with a higher level of certainty.   The greatest key is being aware both of the travel destinations and the events that are occurring at the sight and the region.   Let’s face it, you probably want to warn whoever is travelling to Mexico that there have been a number of kidnappings for ransom of business people, and that some areas are involved in drug cartel wars which require heightened security for a visit.  You also may want to warn someone of a major summit in the city or planned strikes or protests which could disrupt travel or become violent.   Something as simple as requiring a check list from the individual travelling, or to the individual from the travel department can be a major step.  Listing the emergency numbers to contact in case of a medical emergency (and what they need to carry for identification), an outline of what to do if they lose their passport and or have their wallet stolen, instructions on what to do if they get caught in an angry mob, and who they should contact back at the office if they have problems are a minimum for them to carry.  Also a review of the laws, customs and special events or circumstances will help prepare them for any contingencies.  

For foreign travel a quick review of the State Department Travel Warnings web site will show the travel alerts for the countries they are visiting and offer suggestions on how to best avoid any issues.  It might be a good idea for the global traveller or someone within the company to sign up for the Smart Traveler Enrollment Program (STEP).  This government program allows you to enter information in about a trip and receive the latest information on risks in the country, as well as periodic updates on what’s happening around the world.

Within the USA a chat with the client, a review of the local newspaper or speaking with the law enforcement office may provide information on the areas to avoid and what’s going on when the traveller will be there.   Another web enabling site is Crime Reports.com that shows the crime activity for an area over a span of 7 – 30 days, and projects trends (be forewarned, this is a very slow to load web site, but have patience, it can provide some great data).

I hope this information is beneficial.  You might also want to review an article titled “How to Design and Deploy an Effective Travel Risk Management Program“, D. Bruce McIndoe offers suggestions on getting a program into place.   It’s well worth a read, and there are some great guiding principles in helping you build your own TRM.

On October 13, the eyes of the world focused on a remote site in Chile where a group of miners finally began returning to the surface of the earth after 69 days of being confined underground due to a cave in.  It was a feel good moment that took our minds off the economy, negative campaigning, unemployment, and a host of other things to savor the moment.

A major part of the success of the operation goes to the careful assessment of various alternatives and the risks and rewards that were associated with each of the various options.  Even more important was the number and various disciplines the Chilean Government called on to assure a successful operation.    According to an article published in Business Insurance October 18, a wide variety of experts were called in to examine all aspects of the situation.  Experts from the insurance industry, NASA, the Chilean Submarine service, psychologists, nutritionists, engineers, and Doctors spent a considerable amount of time methodically reviewing the problem, and solutions.  The risk analysis continued on through the entire event and were not afraid to take the additional time to make sure the outcome was successful.

The article quotes Lane Bos, senior risk engineer and mining industry practice leader for Zurich  who indicated the planners “developed procedures and followed those procedures”.   The process was completed on the fly, but the key point here was they took the time to develop and then follow the procedures, continuously assessing the risk/reward for the action throughout the process.

Human beings are programed to react in certain ways when an event occurs that scares the heck out of us.  Our primal DNA coding pushes adrenaline, shuts down non essential body functions, and drives the mind to find a solution (have I experienced this type of a situation before?  What did I do and how did it work?  Please let me find the right solution before something bad happens!).  

I believe this is why we are so good a firefighting.  Fix it and store in the back of our minds in case we need it again quickly. 

In developing a risk management or business continuity/disaster recovery plan, you cannot plan for all types of emergencies.  In many cases you move from the 50 foot level to a 500 foot level for a base line and then provide alternatives for various scenarios (as an example evacuating the building as the base level, and different meeting points or exit strategies for fire, flood, gas leaks, tornado,etc.).   In developing the base line concept you also are adding to your experience and becoming familiar with the risk analysis process you develop the tools that help when the unexpected comes up. 

While the excellent article on the benefits of quality risk analysis is not currently available on Business Insurance, there is another excellent article on how Chile tapped NASA for assistance which is well worth the read and provides some insight into the thought process from an earlier time. 

An additional interesting PBS show from Nova chronicles the rescue and looks at some of the physical and psychological effects that helped these miners survive.  click here for further information and a preview of the show.