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Considering the “Where” in Business Continuity Planning
Betty A. Kildow, FBCI, CBCP
In recent years, business continuity management has become more holistic business practice and increasingly recognized as a core business practice. Once focused primarily on recovery of data center operations, then expanded into a more enterprise-wide approach, there is now the realization that for business continuity to succeed in its primary goal, to manage operational risks, it is necessary to fully include all internal and external operations of an organization including all links in the supply chain.
In a best practice business continuity approach this requires a proactive methodology to identify risks to each component of the business…people, operations, facilities, equipment, and technology, and mitigating the identified risks, as well as developing and implementing strategies and plans to respond when disaster strikes. In the logistics arena this must include plans for mitigating the risks that threaten any part of a company’s physical plant as well as plans for response to disasters and recovery of operations following a disruption or disaster of any magnitude.
Warehouses, shipping hubs, office buildings, and manufacturing plants are no longer only physical structures. Each is an integral part of the company’s operations, whether it is a singular building at one location or many buildings at multiple locations; whether owned, leased, or outsourced. As a result, corporate real estate has a key role to play in the development of an organization’s business continuity strategies and plans.
As an example, while once viewed only as storage buildings that housed incoming materials and parts and finished products waiting to be shipped, today warehouses are not simply structures; but highly sophisticated systems that not only receive and track incoming raw materials and components and store and stage outbound merchandise for delivery but also use highly sophisticated technical systems to process orders, track deliveries, and maintain accurate, up-to-date inventory records. The risk factors for this strategic and critically important element of the supply chain must be included in the business continuity planning process. An inability of the warehouse to function at an acceptable level can lead to a failure to meet delivery requirements and in a worst case scenario create a production stoppage.
There are almost daily reminders that a disaster, whether a natural disaster such as a flood, hurricane, or earthquake; technological such as the melt down of a nearby nuclear power plant or a long-term power outage; or a man-made disaster such a terrorist attack or arson fire, can result in significant damage to a building or even its total loss. At other times, even though a building has not incurred any actual damage, an event such as flooding, a hazardous material spill, interruption of utility service, or a severe winter storm can result in an extended lack of access.
To prepare for these disruptions, it is important to thoroughly understand the level of risk and to evaluate each building from a business continuity perspective in order to be fully prepared when a disaster impacts a facility. This can be done by conducting a risk analysis of the building that includes understanding the risks that can be inherited from surrounding businesses and planning for the mitigation of risks that can impact critical facilities that house essential business processes.
Leasing buildings and outsourcing operations are common business practices that can lead to greater efficiency and lower operating expense. These approaches do not, however, hand off
the risk. Each business still “owns” its risks even when a business function is contracted to an outsourcing company.
In the case of a leased facility, knowing the answers to the following list of questions will help ensure a thorough understanding of leases from a business continuity risk perspective:
Who has primary responsibility for negotiating leases for your company?
Is risk management/business continuity considered when selecting a facility to purchase or when negotiating a lease?
Where are copies of leases maintained – both onsite and offsite? By whom?
When do current leases expire?
Who are the primary and alternate off-hour building owner, leasing company, and/or property management contacts for each leased facility? What is their contact information including telephone numbers (land lines and mobile) and email addresses?
If the primary contact is not available, who is the backup person and what is their full contact information?
How often is this information updated and by whom?
Does the lease include a clause that states that the owner and the tenant will jointly address all safety and security issues as required by current applicable building codes and regulations?
Does the owner/property management company or the tenant have responsibility for installing, testing, and maintaining life safety systems such as alarms, fire suppression systems, smoke detectors, emergency lighting, etc., or is this a shared responsibility?
Whose responsibility is it to conduct evacuation training and drills?
Does the current lease require the property manager to establish procedures for:
ü Notification of representatives of your organization if an off-hours event that impacts access to and/or occupancy of the building occurs? – Who are the primary and backup representatives of your company to be contacted? – Who is the primary person who will make the contacts? Who are the alternatives? – How often is this information updated and by whom?
ü Providing designated persons with access to the building in the event the building cannot be occupied for a period of time?
ü Providing alternate office or work space if the building cannot be occupied for a pre-established period of time?
ü Abating rent in proportion to the area of the premises which cannot be occupied?
ü Providing employees with orientation to the building’s life safety systems?
ü Conducting regular fire and evacuation drills?
ü Providing security service?
Is there a plan in place for a thorough damage assessment following a disaster, and if so, who is responsible for conducting the assessment of structural damage? Interruption of any utility service? Damage to or loss of building contents?
What sections of the facility is your company versus the property owner/management company responsible for repairing following a disaster that damages the building?
What timeframe is designated for clean-up and salvage to be completed and when does the timeframe begin?
Does the lease allow for abatement of rent, and if so, under what circumstances and for what period of time?
In the event of significant structural damage, under what conditions can your organization terminate the lease and how much notification must be provided?
In the event of significant structural damage, under what conditions can the property owner or management company terminate the lease and how much notification must be provided?
Beyond a strictly legal relationship, establishing a positive ongoing tenant/owner working partnership is of tremendous value in the event of a disaster or other event that causes significant damage to a facility.
Can the building owner or property management company assist you in finding a temporary alternate location if major repairs are required or a new permanent location if the primary location is destroyed?
Are they sufficiently aware of your requirements should such a temporary or permanent relocation be necessary?
Even when a company owns its warehouses, shipping hubs, and other property, having an ongoing working relationship with a real estate broker or company or property management company has great value in a disaster situation should it become necessary to find temporary or permanent facilities to which to relocation operations. Today’s top real estate managers understand the importance of their role in managing operational risks and are knowledgeable about risk assessment, business continuity strategies, and the necessity of identifying available redundant properties should there be a need to partially or totally relocate on a temporary or permanent basis.
Whether your organization owns or leases buildings, when a disaster or other disruptive event results in significant damage to the building, the following information is vital:
Who maintains copies of building blueprints (exterior and interior build-outs), and where are they stored? Are off-site copies available?
Are specifications for heating, ventilating, and air condition (HVAC) systems, electric, telephone system, etc., maintained off site? If so, by whom and where?
For manufacturing facilities, are specifications for equipment stored off site? If so, by whom and where?
If structural or other changes are made, who is responsible for making sure that blueprints and specifications are updated to reflect any and all modifications?
What arrangements are in place to increase physical security in the event a building sustains significant damage leaving it vulnerable to trespassers? Is increased security the responsibility of the tenant or the building owner?
Ensure that all parties have a thorough understanding of insurance coverage. Work with the person in your organization who is responsible for managing its insurance program to gain a full understanding of current coverage.
What is covered, and what is not?
What is the amount of coverage and what are the deductibles?
What are the coverage limits?
In the case of a leased facility, what coverage is carried by the property owner?
For all leased facilities, the lease document should outline the mutually agreed upon insurance responsibilities of each of the parties, the owner and the tenant. In an outsourcing arrangement, responsibility for each type of insurance coverage must be agreed upon during negotiations and detailed in the contract agreement.
Business continuity planning had as its focus the recovery of the data center and systems. Later the focus expanded to include business operations, and finally the supply chain. Even with the expanded scope of continuity planning, it is still safe to say that even today many businesses do not include any element of workspace planning in their business continuity strategies and plans.
It is somewhat ironic that in many cases the buildings that house the very operations that make possible the delivery of a company’s products or services and the people who keep things running were left out of the planning equation. Workable business continuity strategies and plans must include not only what must be done and who will do it and how the strategies will be carried out when disaster strikes. Full consideration must also be given to the other equally important component – where will be it done. And while continuity strategies typically include plans for an alternate data center location and alternate office space, plans for temporary or permanent relocation of logistics facilities are more often than not omitted.
Deal with the “where” proactively and collaboratively. Make risk-wise decisions when selecting property to lease or purchase. If your company has a Business Continuity Manager or Business Continuity Team work closely with them to ensure that property issues are included in the continuity planning process to help ensure uninterrupted business operations. Be certain that your internal facilities staff, as well as the property managers and real estate brokers with whom you work, understand the time in which you must restore operations and the vital resources needed to maintain continuity and support the strategies that will enable your company to recover operations. For example, consider the advisability of having multiple warehouse spaces that can be utilized and where human capital can reassigned in the event of disaster that results in one location being uninhabitable or inaccessible.
When disaster strikes, be fully prepared by developing and implementing well-designed enterprise-wide business continuity plans that enable the business to continue operations at an acceptable level or to get back up and running as quickly as possible. To do so successfully requires continuity plans that take into consideration the where as well as the who, what, and how.
Betty A. Kildow, CBCP, FBCI, has been a business continuity consultant for two decades, working with a broad range of companies and organization in the development and implementation of tailored programs to manage risk. She is the author of “A Supply Chain Management Guide to Business Continuity” (AMACOM 2011); also available in Japanese:
「事業継続」のための サプライチェーン・マネジメント 実践マニュアル (President, Inc. 2011). Betty can be contacted at BettyKildow@comcast.net.
This article was originally published in Warehousematch.com and LogiReal.com (Netherlands)