With continuing concern surrounding the damaged nuclear plants, the global community continues to watch the turmoil unfolding in Japan. In the twenty days since the Sendai earthquake and the resulting tsunami brought unimagined devastation to the Japanese nation, we are seeing just how small planet earth really is.
Global Dependencies are Felt Locally
Moving beyond the destructive impact on whole communities and the human toll too quickly seems to trivialize the impact, but at the same time, it is important that organizations on a global level recognize our interdependence. These dependencies can be seen clearly in the examination of global supply chains. Companies such as Boeing, Sony, Caterpillar and John Deere have been referenced in the news as enterprises that are feeling the supply chain impact, or anticipating parts shortages within a very short time frame. General Motors has announced production impacts from Louisiana to Spain to Germany related to dwindling supplies of Japanese components.
Forrester Research mentioned yesterday that business continuity is “… back on the agenda …” for business executives. Today the Wall Street Journal reported that the disaster plan from Tokyo Electric Power was inadequate, especially for the combined impact or earthquake and tsunami.
Earlier this week, in a conversation with Gartner Research about testing recovery plans, the point was raised that more than just worst case scenarios, planning for the combination of events raises maturity to a best practice level.
While the Japanese continue their struggle to recover on a massive scale, much of the world has begun to consider “lessons learned.” We did this following the attacks of 9-11-01, following Hurricane Katrina, and similar action is demanded to review plans as to whether the assumptions made are grounded in the new reality unfolding in the news and within the lives of the Japanese people. Business processes and interdependency have become more reliant on automation, built around more complex trading partner and business models, and subject to more rapid impacts for disruptions due to “just-in-time” processes and inventory levels.
Lesson #1: Acknowledge Increased Risk Levels
My point today is simple: resilience and risk managers in organizations of every size must acknowledge the increased risk, and adjust plans accordingly. The lessons gained from examining events in Japan should stir internal reviews by every organization with trading partners concerning risks, logistics, capitalization, insurance and diversification.
For most of us, it is difficult to fully comprehend the impact on the ground in Japan. But all businesses need to examine how complex supply relationships – from raw materials to manufacturing capacity to transportation and selling channels – would be impacted from disruptive events that threaten such relationships. The imperative becomes determining appropriate mitigating actions and procedures in light of what we see in new light following the natural disasters in Japan and other global regions.