Impact of Political Instability on Business Continuity Strategies
Introduction to political instability: meaning and its implications Monitoring, understanding, and adapting to the political situation are critical for every business. Business continuity program may be seriously affected if a tragedy like political instability occurs. The success of the Business Continuity Program when it comes to planning to counter political instability largely depends upon:
Stability of Government Type of Government Economic and trade policy of Government Diplomatic events in surrounding countries Readiness of the company in international competition
Political instability as a disaster & its implications on Business Continuity Any business needs different factors to work in collaboration. This includes physical and human resources to guarantee success, sound policies to ensure steady progress, decentralization of the decision-making process to maintain transparency, and back-up plans to deal with potential disasters.
Business Continuing Program It is advisable to have a Business Continuity Management Program (BCM) in place to mitigate effects of the crisis that may occur due to political instability. Drastic changes in economic and trade policies of Government or change in Government type can hamper BCM. Social unrest, violence, and strikes can put at risk the trust of employees. Therefore, it is imperative to involve all levels of management in preparing BCP. Typically, BCM includes readiness plans developed in accordance with company wide risk assessments and impact analysis, strong policy to mitigate the losses; that is, business strategies plan, involvement of each factor of the company in the crisis management, and ongoing recovery processes.
Objectives of BCM:
Develop a BC strategy in-line with organization’s business priorities & strategic objectives, and changing economic policies of Government
Equip the organization with the directives, plans and procedures to respond efficiently in tune with the changing trade policies of Government and possible threats to the resources
Develop customized BC plan templates and train people in implementing BCM
Develop a plan to implement BC strategy, testing, and auditing
Political instability can affect the following cores of any business:
Decision-making process and the strategic financial decisions Inconsistencies in supply chain, sales, and distribution Business continuing strategies and plans Safety of human and material resources in organization Reputation in the global market Expansion vision
Benefits to the organization Every organization must have a BCM program in place to deal with the political instability scenario as it ensures
involvement of all levels of management in the implementation of the BCM this eventually heightens the trust of people which otherwise could hamper the business continuity strategies
preparedness of the company to tackle fallouts of government politics
development of business continuity strategies in accordance with the probable risks
analysis of impact of crisis on the human cost, financial cost and market credibility cost that helps in designing appropriate recovery plans
implementation of tangible, testable, and cost effective strategies
Business Continuity Planning Business Continuity Planning identifies and prepares your organization for any unpredicted socio-political disaster such as change in Government type. For example, in case of political instability, all the business continuity strategies need to adjust in line with the new country situation and new diplomatic events of surrounding countries. Business continuity planning involves following steps 1. Delegation/ Accountability: BC Policy is the top-level management policy. Senior leadership should have ‘top down approach’
to guarantee success in efficient implementation and maintenance of BCM. 2. Risk assessment with reference to political instability: Organization needs to identify and analyze the types of risks that may influence BCM. Politically unstable conditions may affect the business in many ways like financial losses, stock devaluation, physical and psychological harm to employees, customers, and other stakeholders. Sometimes there is a possibility of having business credibility at stake. It is essential to assess all risks and their impact on BC. 3. Business impact analysis with reference to political instability: Business impact analysis provides a strong foundation to BCP. Business continuity strategies are developed using risk analysis and impact analysis. It is vital to revise these analyses in order to operate an effective BCM program. In case of Political Instability, significant impact is on economic decisions, customers, and suppliers. If there are drastic changes in Business related policies; then it is essential to compare the Business Risk Assessment and Business Impact Analysis that helps in accepting or modifying the solution for BCP. In the Business Impact Assessment, Recovery Point Objective (RPO) and Recovery Time Objective (RTO) are the outcomes. RPO refers to the amount of Data at risk and RTO refers to the amount of time to recover from the loss of Data and the time it takes to return to service. If there is social, unrest; RPO and RTO are crucial in Impact Assessment. 4. Business Continuity strategies plan: Strategic planning addresses identification and implementation of a crisis management plan. BC strategies are tangible and cost effective. If political crisis like war or terrorism makes its way, business continuity strategies must be efficient
to protect lives of the concerned and reduce further damage to the assets. In the crisis of political instability, planning appropriate strategies becomes difficult; as it is not easy to predict the long-term outcome. Offering services at international level is difficult due to ever-changing business policies of each country. It is critical to study business policies of the concerned nations, market trends, cost of infrastructure recovery and renewal in the crisis, stock valuation, and existing political state of affairs while developing strategies. Ideally, all the possible risks have to be measured while developing strategies. 5. Solution design with reference to political instability: Risk Assessment, Business Impact Analysis, and Organizational Recovery Strategy help in designing Crisis Management System. Effective planning and implementation of BC strategies helps the organization to recover from potential threats and financial losses. One way to manage political risk is to acquire political risk insurance. Typically in case of political instability scenario, Government’s changing policies for Trade and Foreign Exchange can be given due weightage in assessing Risk and its Impact on the organization.
Business Continuity Audits It involves the review of BCM. Audit consists of verification of plan’s accuracy, efficiency, and relevance. Continuous appraisals consist of internal assessment and external audit. Internal assessment is periodically scheduled to assess the effectiveness of the plan. The plan needs to change according to changes in the risk en-
vironment. In external audits, consultants nominally verify procedures used to determine critical services, comprehensiveness of continuity plans, and accuracy. The BC audit program identifies control objectives that are met. This includes: Ensure that a recovery plan is periodically tested Ensure that all internal and external parties to the recovery process are aware of their responsibilities and commitments Ensure that all the systems and procedures are satisfactorily documented to assist the crisis management process Ensure that the media and public relations are effectively addressed during an emergency so as to minimize adverse public and business implications
Summary Political Instability can be a serious setback to business operations. Business Continuity is the all-encompassing term that refers to the development of crisis management plans with the help of risk and impact analysis. Edarat Group operates in the Middle East and Gulf region, thus with our knowledge of the political climate, we are therefore most capable of designing the most-apt Crisis Management plans for organizations located in the region. Risk assessment is an ongoing exercise at Edarat. It is performed considering carefully selected indices of changing political scenarios and ever-changing macroeconomics. Though it studies all the regional indices, it also takes into account a number of global indices and trends. This helps us to develop BC strategies for the organizations.
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