How management copes with terrorism & pandemics

By Neil Behrmann

London:- The London bombings of July last year have jolted British management into coping with the consequences of random terrorist attacks. Growing numbers of major companies have also taken steps to protect themselves from the risk of bird flu, according to a survey of Aon, a UK insurance broking, risk management and consulting company.

Until the July 7 bombings last year, many British directors and managers were in denial. This was a natural response as managers are human and do not wish to think of the unthinkable. "Yes it is happening elsewhere, but what are the chances that it will happen to us," was the inadequate response. Some businesses took the view that they were not targets and the terrorism issue didn't deserve priority, according to Aon. Some questioned whether a terrorist defence strategy would expose the company to legal suits and other potential liabilities. Others were merely reactive, asking the board to focus on continuity planning and scenario analysis in the immediate aftermath of an attack and then drift back to complacency within a few weeks.

The July 7 London bombing in London, however, has been a wake up call for British Executives. They appreciate that they should identify, acknowledge and take measures to reduce their risk exposure and manage a crisis should it occur. They appreciate that if they fail to address threats of global terrorism, pandemics and random disasters such as hurricanes, earthquakes and Tsunamis, profits and value of their companies could slide. Key issues in the London bombing enquiry include how business continuity arrangements worked in practice; the role of broadcast services in communication and the use of information and communication technology to aid the response progress. Also how London Transport and the police communicated information, advice and support to commuters, shoppers and tourists.

Multi- national companies such as BP, Shell and Rio Tinto with operations in potentially vulnerable geographical areas, are especially wary. Aon's database of terrorist attacks identifies explosive attacks on oil and gas pipelines that occurred in ten different countries between 2000 and 2004. The February attempted suicide bombing of the Abqaiq facility, which is the world's largest oil processing plant and handles two-thirds of Saudi Arabia's overall petroleum output, is the latest example.

Meanwhile the UK Treasury is establishing a new forum with UK banks to identify, root out, and prevent the use of financial networks to advance terrorism, said Gordon Brown, British Chancellor of the Exchequer, in a recent speech.

British businesses have long experience in dealing with IRA terrorist threats against property. But suicide bombers and their focus on destroying lives rather than buildings or bridges have forced businesses to adapt a different approach. Besides retailers, it is now common practice for large and small companies to have CCTV cameras. Corporate security officers are working closely in conjunction with the police. They are on the lookout for key symptoms of suicide bombers. They closely monitor approaching individuals who are sweating, anxious, agitated and are mumbling possible prayers. Individuals who are wearing bulky clothing are treated with suspicion. Despite this vigilance managers are training staff in busy shopping areas such as Oxford Street to be friendly and welcoming even though any customer could be a potential danger.

"Although many people may feel that attacks of this nature are very difficult to quantify, it is vital that the measures in place are efficiently tested through a full risk analysis and damage assessment," says Justin Priestley, a director of Aon Crisis Management. "The aim is to minimise the financial impact should such terrorist events occur."

The best approach is for finance directors, risk managers and other executives to adopt a proactive policy of focusing on a potential terrorist threat, he says. This should be done at regular intervals. Besides outsourcing to specialist security companies, management need to have their own decision making process and best practice techniques to handle the threat. They have to accept that the world has changed.

Unfortunately terrorism risk is difficult to model, maintains Mr Priestley. Unlike catastrophes such as hurricanes and floods, meaningful scientific data cannot point to the probability of a terrorist attack in politically stable nations. Despite this problem, companies should still do their utmost to develop models on the impact of any attack. Proven and tested software, initially developed by the US military, can estimate blast damage from explosive devices planted at major buildings or installations.

In any event businesses are taking terrorism insurance and bankers are becoming increasingly insistent that borrowers insure collateral assets against terrorist attack.

How UK Business is coping with potential bird flu

Bovine spongiform encephalopathy, known commonly as mad cow disease, afflicted the UK in the nineties and has given the government and corporations experience in coping with pandemics. Companies are thus vigilant about the consequences of a possible bird flu epidemic. Business Forums International, which holds risk management events, recently staged an "avian flu summit" in London which was attended by 300 public sector organisations and multinational companies from the retail, transport, pharmaceutical, financial and pharmaceutical sectors. A keynote speaker from the UK Department of Health warned them to prepare for a worst-case scenario in which a quarter of the population, or about 15 million people would be affected. Conferences at the end of March and in April are expected to be well attended.

AON specialists stress that management should not be unduly pessimistic about a possible bird flu outbreak. They should calmly assess the impact on absent staff on the business and how to cope if cash flow slides, following a sharp decline in orders. Alternative suppliers should also be in place if normal sources of supply dry up because of the impact of the pandemic. Internal or outsourced medical personnel should also be available to identify and monitor suspected cases. Ventilation and filtration systems should be constantly monitored and general hygene of buildings be improved. Video and teleconferencing facilities should be in place if travel is limited. Key executives and staff should be isolated from those that travel and are at greater risk from infection. Management should also provide staff with laptops and other technology to enable them to work from home during an emergency. Businesses must also be sensitive to the fears of customers and demonstrate that there are limited chances of being infected by staff.

"Contingency plans for a pandemic should be practiced, tested and practised again," stresses AON.

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