Companies have likely been preparing for years, but it’s never too late to review business-continuity planning.
Aside from the humanitarian impact of the earthquake, tsunami and now nuclear meltdown threat in Japan, the other big headline to come out of Japan has been from the country’s manufacturing sector. According to reports, automakers and auto parts makers have shut plants, a plant that makes significant parts for smart phones, notably the LCD screens, has stopped or slowed production, and bankers are now fleeing the country.
Multinational corporations have mostly addressed business continuity planning (BCP), mainly as a result of the various mega-disasters of the last few years – i.e., 9/11, Hurricanes Katrina, Rita and Wilma, the Indonesian earthquake/tsunami and last year’s earthquake in Haiti – or at the very least should have been making a big push to close any gaps in the supply chain or other critical business functions. One would hope that Apple has another source for its iPhone or iPad screens. Likewise, despite the outflow of bankers, one would hope that companies are able to finance local operations – payroll, etc. – without the physical presence of a banker.
For treasury, what the quake might do is tip the balance between centralization and decentralization. As IT has noted before, the pendulum swings back and forth between the two. More recently, it’s centralization, but many of those companies have been adopting more of a hybrid structure, where there is some centralization, say, at corporate HQ in the US, but some parts of treasury decision-making given at the local level. This process also leverages the Cloud and software as a service (SaaS) offerings.
There has also been a push to embed treasury in the businesses units. This tactic, adopted from enterprise risk management concepts, takes advantage of employee rotation. Here, treasury standouts would be sent out to the BUs, or vice versa, thereby getting those units to think treasury; that would mean getting sales, invoicing, AR and AP data “treasury ready.”
Some best practices
In terms of the recent Japan catastrophe, there is little companies can do now that the crisis has unfolded. Nonetheless, it’s still a good reminder that, like the daylight savings rule about changing the batteries of smoke detectors, whatever program is in place should get a battery change. In that vein, here are a few best practices International Treasurer has explored before:
- Rapid employee notification is essential. The best approach is an automated calling system, or a human call chain, that alerts mission-critical teams of the nature of the crisis and gets the contingency plan rolling.
- Employees must know how they will receive information in an emergency—via phone, Blackberry or other means.
- Employees must be given actionable messages—where to go, what to do, and when.
- Key employees should have dedicated communications networks so their attempts to connect are not swamped by inquiries by lower-level employees.
- All necessary skills and corporate functions must be represented on the main response team. It may seem like overkill at first, but if the crisis drags on, all facets of the business will need to coordinate.
- Functional backup sites must be ready to go at a moment’s notice, with critical staff aware of their location and able to reach them. Transportation plans (e.g., busing) for employees should be ready to go.