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Business as usual?

On 12 December 2012, the current cycle will come to an end – according to the Mayan long count way of reckoning time, that is. Opinion is divided on what this will portend. Spiritual enlightenment or apocalypse?

Doomsday scenarios aside, just what are the risks that companies and their boards should be factoring into their planning for 2012.

“In 2011, we felt a certain cautious optimism based on the fact that the recession seemed to be nearing its end,” says Michael Davies, MD of ContinuitySA. “However, that now appears to have been optimistic. The global economy is not recovering as quickly as hoped and our currency continues to be volatile – in fact, on balance, we think that the risks of social and political turmoil have actually increased. The danger is that hard-pressed companies may be tempted to cut spending on business continuity. However, given the risks and the new Companies Act, that’s exactly what they should not do.

Michael Davies, MD of ContinuitySA

“The good news is that the rapid maturation of business continuity hosting is making a much more sophisticated offering available. By tapping into the infrastructure-as-a-service model, companies can now begin to turn business continuity capacity from a dormant asset to one that generates value for the IT environment.”

Davies and his team at ContinuitySA have identified what they believe are the top-10 issues facing business in 2012 that are likely to impact on business continuity strategies.

1. Socio-economic challenges

Last year, it seemed as though we might be coming out of the recession, but now the talk is all about the dreaded double dip. Economic hardship is exacerbating social and political tensions, especially as retrenchments swell the hordes of unemployed. Too many people without work or the prospect of it places a huge burden on the state, provides the climate for crime and is likely to fuel tension between the haves and the have-nots.

2. Government performance and service delivery

Ongoing service delivery and corruption issues have continued to fuel widespread social unrest. Some commentators are even talking about popular uprisings comparable to those that occurred earlier in the year in North Africa. Instability in the ruling party continues to unsettle political and social life, and this will only get worse as the ANC’s leadership conference approaches. Meanwhile, no doubt fuelled in part by the economic problems mentioned above, strikes and social protests seem to be getting more prevalent.

For business, one direct consequence is frequent work stoppages, with staff actually finding it hard to get to their places of work.

“It seems that South Africa is coming to a crossroads again, faced with the choice between the high and low roads,” says Davies. “We have to have confidence that our leadership will make the right choices, but, meanwhile, prudence demands a renewed focus on safety measures, including proper business continuity plans.”

3. National infrastructure remains weak

While Eskom contrived to come through a very cold winter with relatively few blackouts, concern remains high as summer is the time for planned maintenance. Another concern is the availability of skills to maintain the ageing infrastructure at Koeberg, and to operate planned new nuclear power facilities. On the positive side, recent moves to introduce independent power generation and green power into the South African energy market are welcome.

That said, there are worrying reports that lack of additional energy capacity at present is affecting the ability of some data centres to expand.

Other infrastructural challenges include the new toll roads around Gauteng and the new national health insurance system. While both are desirable, they are placing additional financial burdens on the middle class – ie, the small tax base on which everything rests. Is the middle class coming close to feeling as squeezed as the poor and unemployed and, if so, how will it make its distress known?

4. Water remains a concern

Water security remains a problem in this country, exacerbated by the pollution of our existing water stocks.

Although the government finally woke up to the problem of acid mine drainage and made R400 million available, media reports indicate that little action has actually occurred. If substantial progress is not made in finding a solution, the acid water is expected to begin decanting into the Johannesburg basin in March 2012 – it is already decanting on the West Rand. Companies with IT equipment in basements need to remain on high alert.

5. Worsening business climate

The risks mentioned elsewhere will continue to weigh on risk-averse foreign investors, while the volatility of the rand will encourage destabilising capital movements. The socio-political challenges we have mentioned are also taking their toll on the outlook of local business. With the business confidence index declining, investment in equipment and people will be curtailed at a time when they are more necessary than ever. Militant unions and demands for increases that are significantly above inflation are further worsening the business outlook.

With revenues under pressure, many companies will be tempted to skimp on business continuity but this approach is short-sighted.

6. Regulatory burdens and responsibilities

Promulgated during 2011, the new Companies Act has made the directors of companies personally liable for the outcome of their decisions. The legislation is new and untested, making compliance even more risky than it might otherwise have been.

In combination with the recommendations of the King Commission, the new act has made risk management a much more important item on the board agenda – and this includes IT risk.

Boards are increasingly accountable to all stakeholders rather than just shareholders. In this regard, environmental issues are becoming more prominent, which may add impetus to the move towards cloud computing, which has the effect of greening the IT department.

7. The sting in the supply chain tail

Recent natural disasters like the volcanic eruption in Iceland and the earthquake and tsunami in Japan have emphasised the flipside of global interconnectedness. In order to ensure business continuity, companies must increasingly consider their entire supply chains. Adequate consulting around the business continuity threats originating outside of the organisation is imperative.

8. Cloud computing blurs vision

As predicted, 2011 saw considerable movement in cloud computing. While it is clear that cloud computing has real benefits, non-specialist public cloud offerings should not be confused with specialist business continuity, which is also making use of cloud-based approaches.

“The need to have absolute quality assurance and security in terms of your business continuity remains, especially in light of boards’ enhanced accountability,” Davies notes. “On the other hand, the greater availability of bandwidth and improvements in technology are changing the model.”

9. Mobility is creating new risks

The growing range of smart mobile devices, and the explosion in useful applications, has made mobility a fact of life. At the same time, there is growing awareness of the value of a company’s data, hence the emergence of ‘data as a platform’. Securing and backing up the corporate data on mobile devices usually owned by employees rather than companies is raising CIOs’ temperatures worldwide.

10. Business continuity is still not integrated

Given the scale and magnitude of the challenges business faces, the danger remains that business continuity is marginalised and siloed. In many instances, financial pressures are causing companies to cut back on business continuity. For example, banks which have retrenched large numbers of people now have excess office space which they tend to use to provide their own workplace recovery – and this may lead to a business continuity solution that is less than optimal.

A related issue is that the long-term viability of smaller business continuity providers is looking less certain in this climate. We think this will prompt a ‘flight to quality’ in many cases.

As indicated above, the emergence of new opportunities to remodel business continuity using a private cloud approach is a game-changer, offering cost savings, a much more effective product and the opportunity to get a return on your business continuity investment.

“The outlook is less optimistic than it was 12 months ago, and the ANC’s leadership conference during 2012 will unfortunately distract government’s attention from its real job. On the positive side, companies that understand the risks can plan accordingly – and troubled times also create tremendous opportunity for those with their wits about them,” concludes Davies.

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