Companies Need To Have Contingency Plans In Place

Saturday 22nd October 2011 | The Nation | Link

Andrew Durieux, managing director of Coverage Ltd, which specialises in crisis management, told me the other day that business-owners and managers in Thailand should by now have started their business continuity planning.

The country's massive flooding has already affected more than 14,000 firms directly or indirectly due to the shutdown of 1,000 factories in at least six industrial estates in Ayutthaya, Pathum Thani and other provinces.

His advice is that every business should have a crisis management team headed by one person who is responsible for both strategic and tactical planning.

The crisis team will have to assess damages, look at the options and put in place the documented plans and communication notes.

Once they have the plans, they should secure resources, book the cleaning services, order equipment to replace that which has been damaged, acquire funds that may be needed, and talk to insurance firms.

The faster you can do that, the faster you will be able to recover from crisis.

Durieux cites Western Digital as an example. The US-based firm is the world's largest maker of hard disk drives. It has seen both of its factories in Ayutthaya province heavily flooded.

However, Western Digital, whose global market share for hard disk drives is over 30 per cent, also has another plant in Malaysia, so it can boost output at the Malaysian facility to help offset the production shortfall in Thailand.

Another example is Toyota, whose factories in Rayong and other provinces are not affected by the floods, but has still had to halt production because of the shortage of some parts, as its suppliers are in flooded Ayutthaya.

In the case of Honda Automobiles, the firm has a combined production capacity of 240,000 vehicles per year in Ayutthaya as well as additional annual capacity of 40,000 units in Malaysia. As a result, Honda may shift some production to the neighbouring country to minimise the impacts from the supply chain disruption.

This flood crisis may take a week or a month to conclude. After the water has drained away, affected firms will have to go through a recovery process, which could take anywhere from three to six months to complete.

Auto factories in Rayong, for example, may need to find alternative parts suppliers elsewhere in order to resume production.

For smaller companies, they will have fewer options because they may have only one or two factories which are already under water, so they should now focus on necessary steps to restart their businesses as soon as possible once the water is gone.

They will also have to keep up communications with their workers, who may return to their home provinces during this period, at the same time setting up temporary sites to manage the business recovery plan.

They should also talk to their insurance firms about compensation, secure cleaning and equipment repair and other services, so that affected factories can resume production as soon as possible.

In Durieux's opinion, Thailand had generally managed seasonal flooding in the past quite well. However, this year's volume of rainfall in the north and elsewhere was unusually heavy and prolonged, especially in the wake of three recent typhoons within a short space of time.

Naturally, the large amount of water from the north flows downstream to the central plains and Bangkok in order to reach the ocean, but this time it seems the floodwaters have been mismanaged on a grand scale.