Disasters happen

When we build power lines above ground and under trees, we can expect storms to disrupt electricity supplies.

When we rush implementation of IT projects and move staff to other projects on completion, we can expect errors to be overlooked.

A good board will have a clearly defined risk appetite. Directors will know what risks they face, how they are monitored, and what level of impact they are risking.

On Sydney’s north shore we have very reliable electricity delivered at a fairly high price. The boards of our retail and distribution companies are aware of the risks of disruption caused by storms, even if nobody expected a storm quite like the one that hit Sydney on Tuesday. However, the emergency response was rapid, efficient, and proactive in preventing the disaster from getting any worse. They even told me to go home and stay home because branches were still falling. I went. I thanked them first.

Westpac has a history of efficient transaction management. Yet when they had to design and implement a system to amalgamate the data from their transactions with other banks, they allegedly had a team that was resource constrained and dismantled immediately the job was done. Nobody checked that the number of transactions with each bank added to the number of transactions from every other bank equalled the number of transactions on the report that should have accurately captured the data. 29,000,000 unreported transactions later the bank is in serious disarray.

Worse, it appears that the issue was discovered in May 2017 and yet only reached a senior manager’s attention in July 2019. That suggests a culture where people are too busy getting through their own work that they don’t have time to sit back and think about the potential implications of anomalies or where staff are fearful of reporting bad news.

Does your board know your business well enough to describe the culture, understand the stresses, and anticipate the issues? Are you prepared to respond fast and well?