When will the investment for a BCM programme pay off? Most people think that the only correct answer is when a damage scenario has taken place. Hopefully then an effective BCM programme will reduce an otherwise much more costly, or even possibly fatal financial impact to a bearable amount. Then, and only then, will the investment in BCM be paid off – just like insurance policy.
In our finance driven business world however, investment in BCM needs to be justified in financial terms, unless a BCM programme is forced upon an organization by its clients or by regulatory authorities.
While the cost of a BCM programme is widely known, many people will have no idea what the returns will be. During my presentation at the BCM World Conference, I will discuss what I believe are four sources of return for those investments that go some way to justifying a BCM programme.
Insurance premiums and interest rates are the most obvious candidates; however they are the least effective ones. One can reduce the business disruption insurance premium by reducing the time coverage of the business disruption pay out. At banks, it is possible to negotiate the interest rates with by providing additional information about a reduced credit default risk due to a working BCM programme.
More potential for a return of investment however stems from the lowering of process costs by improving process efficiency. When discussing contingency procedures and measures, the way the business operates is more closely scrutinised and so the opportunity is provided to generate ideas as to where efficiencies and savings can be made. These ideas may find their way into day to day operations of a company with the potential to improve the effectiveness or efficiency of business processes across the board.
The largest effect however will actually come from the new ISO 22301 standard. This standard will become instrumental to comply with purchase regulations of clients, especially the larger ones. More often than not, contingency planning will become a requirement of critical suppliers. In future, one may lose existing contracts or fail to win new tenders without a certified BCM programme. BCM will be fundamental to winning or sustaining these contracts.
BCM leaders often struggle with justification for investment in a BCM programme in general or individual BCM measures in particular. Especially when discussing with economists or business administrators, those working in the BC industry are regularly confronted with standard business case approaches to justify BCM, which require a detailed explanation of the return on investment. My talk offers a way to meet this demand and outlines in more detail an approach on how to calculate and demonstrate a return on investment of a BCM programme.
This blog was first posted on the BC Eye during the build up to the BCM World Conference and Exhibition in November 3013 where Rainer Huebert MBCI presented on this very subject.