What is the lifeblood of your business?

Source: Howden

Author: Jack Durrant,?BA (Hons) FCII

Read time: 5 minutes

One challenge for most business owners is to have enough of what they need when they need it. This could be for anything, but it's probably best to explore this topic through the example of a business that produces something; for example, a vehicle manufacturer.?

The manufacturer brings components from all over the world from lots of different businesses across their supply chain. Therefore, the final product might be assembled in Germany, but components could have travelled from the Far East. To keep production running smoothly, these businesses will often employ a 'just in time' supply operation. This means they don’t have large quantities of stock sitting around unused, so?they avoid having to pay for lots of additional storage. Therefore, the stock arrives precisely when they need it.

Just in time comes with its own challenges, but it’s finely tuned. Most things turn up within days or sometimes hours of being needed and the process is slick, with cars coming off the production line every seven or eight minutes… but unfortunately it doesn’t always work like that.

Many will remember the Suez Canal getting blocked by the cargo ship Ever Given, which created havoc in the world of transportation logistics leading to months of delays for many businesses across the world.

It was bad news for car manufacturers because 80 per cent of all solar cells, and more than 50 per cent of all lithium-ion batteries, are produced in China with many of them making their way into Germany or France to install into their cars.

Imagine the frustration and pain this caused for European automakers. They have a factory that’s fully operational, staff getting paid, and an ever-lengthening queue of components waiting to go into their cars, but they’re being held up because of a small issue with a single component that isn’t available but needs to be installed before the process can proceed.?

It means that cars [or whatever you’re making] cannot be built, all whilst the business has a diminishing amount of income because they’re running out of finished stock to sell. This exact same issue happened elsewhere recently when there was a lack of microprocessors, and many remember the spike in second-hand vehicle prices as a result.

However, not all is lost, there is something as a business owner you can do to prevent total catastrophe; ultimately, most interruptions can be covered by insurance policies, for a cost.

Business interruption – it’s not always about the ‘stuff’ you need

With this manufacturing example in mind, what’s the lifeblood of your business? Is there something in your business which could cause a similar issue, meaning you cannot provide a service or product to your own customers?

This could be a vital link in your supply chain, which may lead to a similar issue with sales. Businesses also need to evaluate how much they rely on technology. For example, what is going to keep your business going if you can’t access your computer or if something prevents your software from running?

Many businesses could have a physical denial of access issue, or utility outage. Companies operating in the advisory space such as accountants or architects, brokers, lenders, and even restaurants and hotels nowadays could have interruption issues relating specifically to technology. Just think of how many professional businesses rely on technology, booking systems, and software. If these critical technologies go down, it can render entire businesses out of action.?

It seems like it should be a simple fix, and technologically usually gets back up and running in very little time, with no further issues and everyone carries on as normal. Does this lure us into a false sense of security? What if the answer isn’t as simple as ‘turning it off and back on again’ in future?

A real technical outage, through something like a system failure or malware could be devastating as an interruption to a business. However, the traditional business interruption insurance package will not do anything for a business in the event of a cyber outage.

We’ve had very recent examples of simple software updates rendering entire networks out of action. The CrowdStrike outage is estimated to have caused around ￡5.4bn in losses for Fortune 500 companies alone.?

What if your business had a technical outage? What plans do you have to recover? Most insurance policies have very stringent terms on outages, so it's worth reading the details of your cover if you have a policy.?

I think more and more about the impact of technical outages, especially caused by crime, ransomware, or even human error. My question ?for companies is, how resilient are you to an outage whether it's cyber-related or not? How long could you last without your business's lifeblood?

If you’d like to explore how to properly protect your business, please get in touch.