Business Continuity Management

esophagusbunnyManagement

Nov 20, 2013 (3 years and 8 months ago)

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Aon Global Risk Consulting


Alex van den Doel / Rubert Nieuwenhuis

VimpelCom




Ramon
Tolk


DACT

8 November 2013

Business Continuity Management


Do
you know the impact
of business interruptions on your companies'
financial performance?











How to enhance your risk management function
by implementing BCM


DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Why

Business
Continuity

Management
matters

1

Ship route Suez Canal essential for
international trade

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Stress Testing your continuity risks


approach

2

What (extreme) scenarios can
jeopardize your financial objectives?


Approach


Define risk bearing capacity


Develop scenarios


Industry specific


Organization specific


Out
-
of
-
the
-
box


Quantify impact of scenarios


Evaluate against risk bearing capacity


DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Stress Test


Risk Bearing Capacity


Information from financial statements


Balance sheet total: 880M


Equity: 330M


Solvency ratio = 38%




Claim of 50M will lower ratio to 32%


An impact of 28M will lower the ratio to 34% → RBC = 28M






Covenant in financing arrangement specifies a threshold of 34%

39 %


38 %


37 %


36 %


35 %


34 %


33 %


32 %


31 %



Breach of Covenant!




DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Source
:
Aon

Global

Risk Management
Survey

2013
-

1.415
respondents

representing

a
broad

range of
industry

sectors in 70
countries

(64% > 1B
turnover
)

Perception

of business
continuity

risks

4

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Impact
on

financial

performance


An average impact of 25% on

shareholder value and an impact which

commonly lasts for two years!


Historically, supply chain disruptions can

lead to an average of 9 percent lower

sales and 11 percent higher costs!


Both physical and non
-
physical events

drive supply chain disruptions, and 85%

of companies reported disruptions in

2011 (study of BCI in 2011)




Other recent examples
:

5

Source:
Vinod

Singhal
, Professor at Georgia Institute of Technology, and Professor Kevin Hendricks, Richard Ivey School of Business,

The
University of Western Ontario, London, Ontario N6A
-
3K7, Canada

Company

Event

Value

Reaction

TEPCO

Japan EQ

-
89.6%

-

$ 37bln

Dexia

Greek debt

-
87.3%

-

$ 3.9
bln

Research

in Motion

Service Disruption

-
49.7%

-

$ 6
bln

BP

Explosion / Oil

spill

-
29%

-

$ 53
bln

Apple

Iphone

Antenna

-
2.4%

-

$ 6
bln

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Objectives


Protecting your financial performance from the impact of business interruption risks



Understanding methods and techniques to map supply chain interruption risks and quantify the
financial impact on revenue generating activities



Enhancing Enterprise Risk Management by implementing Business Continuity Management and
focus on high impact exposures



Evolving the Risk & Insurance function towards a more mature operational risk management
function





6

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Agenda


Analyzing

the impact of business
interruption

exposures

on

financial

performance



Business
Continuity

Management
-

Execution


Link BCM


ERM


Buiness

Continuity Management Process


Quantifying

financial

impact



Business
Continuity

Management


In
Practice


Case
study

VimpelCom



Peter den Dekker



Questions






7

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

What is BCM

"BCM is the ongoing process of

identifying continuity threatening risks

and defines a program for mitigating those risks

and recovering as soon as possible

within predefined time objectives".

8

Structured programme

and process

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

How

does BCM link
ERM
?

9

BCM is becoming more and

more a strategic topic!!

BCM is the key mitigation for

continuity risks

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

BCM Process

10

Analysis


-

Conduct business
impact analysis

-

Conduct threat
analysis

-

Conduct requirement
analysis

Design


-

Define continuity
strategy


Strategic


Tactical


Operational

Implementation


-

Implement response
organization

-

Implement response
plans

Validation


-

Maintain

-

Review

-

Exercise

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Quantifying financial impact
-

Business Impact Analysis (BIA)


BIA provides a very structured and efficient approach to:


Identify and quantify business interruption risks


Map complex and global supply chains


Measure the value of current mitigation measures



BIA enables organizations to consolidate the BI

exposure from unit level to every consolidated level

(country, regional, global, etc.)



The BIA provides a solid basis for risk management improvement:


Clear picture of the biggest interruption risks, accumulation effects and critical

issues


Focused development of risk management strategies (loss prevention and

response)


Optimization insurance cover and limits


Enhancing business interruption risk awareness and understanding

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Step 2: Example of results of quantification unit level

Sup
ply chain analysis

Dataroom

analysis

Site analysis

DACT

|
AGRC &
VimpelCom

Proprietary & Confidential

|
8 November 2013

Step 2: Quantifying consolidated level

Delivering two key elements:



Dependencies network



Based on unit level outcome defining and modeling material
dependencies between suppliers, own units and customers


Making use of a "engine" to simulate impact



Consolidated risk profile on selected level



Calculating the impact of unit level events though
dependency network


Creating consolidated loss exposure profile on selected level