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Assess Indirect Risks When Preparing a Disaster Recovery Plan

Organizations typically create disaster recovery plans by assessing past events. Ultimately, this means implementing solutions that address the risks they believe are most likely to occur. However, today’s business environment varies greatly from even the recent past.

By relying on hindsight and previous experience, construction organizations often neglect to strategize around high-impact, low-likelihood events that could affect them directly and indirectly through their complex supply chains. With the commercial construction industry’s growing emphasis on collaboration, organizations should formulate disaster recovery plans that include the critical actions to take if an event affects the company or its partners.

Hurricane Sandy illustrated how risks are more interconnected than ever. Not only was the Northeast affected, but the storm also caused transportation, manufacturing, financial, and communication issues that cascaded across the country. Conducting business as usual became impossible for many firms, including those located outside the storm’s primary path.

For construction companies, anything manufactured in or that passed through the New York and New Jersey area was suddenly and unexpectedly delayed. With faster project timelines, tighter budgets and more complex engineering requirements, postponing work for even a few days can have catastrophic financial implications. Contractors must take into account how their risks are connected to their suppliers’ and partners’ risks, and subsequently how all those disaster recovery plans are inextricably linked.

An effective plan should consist of the actions an organization would deploy immediately following a disaster. Critical first steps should include ensuring the safety of employees and the public, the integrity of assets, and the availability of power and water. Ultimately, business leaders must put together as much of a plan as possible without knowing the exact details of how a disastrous event will unfold.

Organizations also must consider actions that go beyond mere business survival and look at what they can do to keep projects and profits on track. This involves looking at partners and suppliers. What is their susceptibility to disasters? What plans do they have? Are key suppliers located in an area prone to weather emergencies or natural disasters? Are critical overseas partners located in areas facing political instability?

Too many organizations attempt to manage risk using spreadsheets and reports, without employing a central hub for the data or a systematic approach to collecting it. This strategy invites error. It becomes too easy for the data to become outdated and for risks to be unaccounted for, simply because completing the analysis is too time consuming or ineffective.

A real-time enterprise risk management solution—with robust, informative dashboards—is crucial to understanding the connected nature of risk, as well as the fragile relationships that comprise a supply chain. Today’s tools can make the most important information immediately visible for fast reaction time and improved flexibility. This visual understanding is particularly important when it comes to high-impact, low-probability events that may have been left out of a company’s basic disaster recovery plan.

With the right tools in place and a systematic approach to risk tracking, organizations can cut through mountains of data to find the real issues that can impact goals and objectives, and ultimately prepare a comprehensive disaster recovery plan.

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