PwC has launched an advice manual to help businesses handle crisis situations, like the magnitude-9.0 earthquake and tsunami that devastated Japan recently. PwC’s business continuity management team has written the paper which covers supply chain risk, customer collaboration, and reputation management.

In today’s interconnected world, collaborating with suppliers and developing collective resilience is key to the long term survival of any organisation, the paper suggests. Yet few organisations develop joint contingency arrangements with their suppliers, the local community and the wider market to manage a loss of services from either side of the relationship.

Regularly, organisations work in isolation and place the emphasis on protecting their own interests rather than strengthening the collective resilience of the interdependent supply chain. This means they will be in a weaker position once the incident itself has passed.

Paul Robertson, crisis management leader, PwC, said: When the global supply chain becomes volatile, immediate and longer-term operational challenges emerge for those with operations inside Japan as well as for those whose supply chain depends upon manufacture or service provision from within the country. Lacklustre handling of the disruption will cause stakeholders and customers to lose confidence and potentially cause irreparable damage to reputation and relationships. On the other hand, organisations that collaborate closely with their customer and client base can positively manage the crisis and recover more quickly, and may even enhance their share value.”

In terms of business performance, when routine processes are halted or severely disrupted many companies will see their cash flow slow and the ability to meet their service obligations hindered, suggests the paper. Customer demands may change dramatically, as contingency procurement stretches limited supplies and competitor businesses seek alternative methods to gain business and maintain their own viability. To make the situation worse, many standard controls may be dropped or relaxed to facilitate recovery, thus increasing the company’s exposure to risk.

“The period after a crisis is time-critical. It is essential for organisations to maintain active communication with key stakeholders in the aftermath of any crisis because when communication is managed poorly, they will receive the wrong message,” Robertson added. “Fear and uncertainty can lead to ambiguity, exacerbated by media speculation, and could potentially lead business leaders and employees into making poor decisions, and volatility in stock markets increases exposure to risk for those invested in that market.”

According to PwC, businesses looking to strengthen their crisis management plans and business continuity capability should consider the following questions:

•How would existing crisis management and business continuity plans be challenged by a wide-area disaster?

•Does the organisation understand the full extent of its supply chain exposure?

•Does it understand what employees, stakeholders, customers and community expect of it in a crisis and do their plans reflect this?

•Does it plan and exercise in collaboration with the community and with its supply chain partners in order to build greater resilience?

•What are the indirect risks to the business?

•What systemic or geo-political risks have been considered in the crisis and business continuity planning process?

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