News International’s Recent Difficulties Highlight Consequences Of Poor Risk Control

July 27, 2011 - PRLog -- LONDON – FifthStep, the business continuity planning and management specialist, has raised concerns that a large number of UK businesses are exposed to serious disruption or business collapse through failing to implement effective business continuity and reputation management plans. It cites News International’s recent difficulties as an example of how failing to prepare adequately can result in a damaged reputation and loss of market confidence.

FifthStep believes the reputational difficulties that News International and other large corporates such as, BP, Kraft, Toyota, Shell and Airbus Industries have recently experienced, could have been avoided or at least significantly minimised. FifthStep advocates a more flexible approach to business continuity and crisis management planning using sophisticated Internet based tools, which have the capability of deliver far better value for money than the out-dated risk management processes currently used by the majority of British businesses.

FifthStep’s conclusions are supported in recent research by the Cass Business School. Its study of 18 recent high profile corporate crises that showed that the majority of the companies and their shareholders suffered severe, uninsurable losses and most reputations suffered severe damage. All of the companies emerged with obvious immediate harm.

From the analysis of the failures that gave rise to each crisis, seven key issues emerged. These underlying risks arise from:
*   Inadequate board skills and inability of NED members to exercise control
*   Blindness to inherent risks, such as risks to the business model or reputation
*   Inadequate leadership on ethos and culture
*   Defective internal communication and information flow
*   Organisational complexity and change
*   Inappropriate incentives, both implicit and explicit
*   ‘Glass Ceiling’ effects that prevent risk managers from addressing risks emanating from top echelons.

The key findings of the research in relation to the risk management role and responsibilities of senior executives were:
*   Current techniques were unable to identify or manage the dangerous underlying risks and the engagement with risk professionals needed to be enhanced
*   Boards, particularly chairmen and NEDs, have a large, important blind spot – their leadership is essential if these dangerous risks are to be identified and managed.

The report also suggests that in spite of the large investment these companies made in risk management, the outcome could not be considered value for money.

Darren Wray, FifthStep’s CEO, commented: “We have become increasingly concerned that many boards, and particularly chairmen and non-executives, believe they have adequate crisis management plans in place. Unfortunately, the evidence clearly demonstrates that quite the opposite is true and that businesses are far more exposed to lethal threats to the company’s business, its continuance and reputation from even a low-level corporate crisis than they could ever have imagined.”

He continued: “Most of the serious underlying risks fall between the cracks as they are outside of the scope of current risk analysis practices and beyond the remit and expertise of typical risk managers. Unidentified and therefore unmanaged, these risks pose an unnecessary and dangerous threat to the business. We avoid the traditional mechanical approach and instead take a more holistic view to identifying and managing risk. The big benefit is that not only is this demonstrably more effective but it also reduces the cost of risk management.”

The Cass Business School report authors concluded: “Many of the risks we have highlighted are inherent in every organisation. Unrecognised and unmanaged, these underlying risks pose a potentially lethal threat to the future of even the largest and most successful businesses. Boards, particularly chairmen and NEDs, have a large, important blind spot in this dangerous area. Without board leadership, these risks will remain hidden because only boards can ensure that enough light shines on these hard to see risks.”

FifthStep have recently partnered with Crisis Commander, the developer of Crisis Commander Software, to complement and enhance the company’s suite of risk and crisis management offerings.

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FifthStep is a specialist provider of business continuity services for the digital age. Headquartered in London, the company is committed to managing and minimising the risk of businesses failure or disruption caused by unexpected events and crises. It combines business continuity consultancy with implementation and crisis management services that enable organisations to continue to operate when faced with adversity.

Its consultants operate throughout the UK and the Continent, providing best practice advice and guidance regarding Business Continuity, Crisis Management, ICT Continuity and Business Agility planning and implementation of resilient business infrastructures.

As well as designing robust business continuity management systems and providing business continuity planning support, FifthStep also handles reputation management and social media monitoring to counter adverse publicity.

For further information please visit http://www.fifthstepbusinesscontinuity.com