Statistics revealed by a recent IMC (Institute of Crisis Management) report shows that white-collar crime is behind 18% of reported business crises in 2009, followed closely by mismanagement with 16%.
The most recent and spectacular of examples is that of Bernard Madoff, CEO of Bernard L. Madoff Investment Securities. His fraudulent activities cost his investors billions of dollars, making this particular case the largest incident of investor fraud ever recorded.
According to the report, six thousand business crises were reviewed. The fact that the majority of these crises have been attributed to white collar crime certainly merits closer inspection of security systems and operational crisis management plans. Issues such as consumer activism (9%) and labour disputes (8%) represent the highest sources of risk.
As service providers focused on equipping decision makers to not only deal with a crisis, but also have in place a plan to continue operations, we are also interested in a noticeable increase in what is known as smouldering crises. Smouldering crises are defined as issues that emerge on a small scale and that people within an organisation should pick up on and address in order to minimise any potential problems.
Toyota, for example, was accused by US authorities of knowing about braking defects in its vehicles for four months before the situation escalated into a huge product recall. This followed the massive accelerator recall that cost the motor vehicle manufacturer approximately $2 billion and over 100 000 units in lost sales. A closer general inspection of business crises over the past 10 years shows that two-thirds of all crises fall within the category of smouldering, and most could have been spotted and prevented.
The state of the broader global commercial environment is such that it is not a question of whether or not to have a business continuity management strategy in place, but rather how effective will this strategy be if - and when it needs to be enforced. Unsurprisingly, given the global financial crisis of the past few years, the IMC report also lists the most crisis-prone business sectors in 2009 as:
1. Banking.
2. Security brokers.
3. Aircraft industry.
4. Investment companies.
5. Petroleum industry.
6. Pharmaceutical companies.
7. Automobile manufacturing.
8. Insurance industry.
9. Software.
10. Food services.
The reality is that no industry or sector is full-proof and able to withstand any crisis. The advent of social networking, mobile and wireless technology, and high-capacity, sophisticated communication platforms, means that we are all in constant contact. It also means that the risks are there and everything needs to be done to ensure that should a crisis emerge, there are contingency plans in place to continue to do business.
For more information contact Dean Horner, 42 Consulting Southern Africa, [email protected]
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