Primary navigation:

QFINANCE Quick Links
QFINANCE Topics
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > Operations Management Best Practice > Business Continuity Management: How to Prepare for the Worst

Operations Management Best Practice

Business Continuity Management: How to Prepare for the Worst

by Andrew Hiles

Table of contents

Case Study

Buncefield

Buncefield Oil Storage Terminal supplied fuel to London Heathrow from pipelines transporting fuel from the north of England. It was owned by Hertfordshire Oil Storage Ltd, a joint venture between Total and Texaco. Other businesses were attracted to the site—Marylands Industrial Park—because of its low cost.

Around 06:00 hours on Sunday, December 11, 2005, an explosion occurred, measuring 2.4 on the Richter scale, it was heard as far away as France and the Netherlands.

The Buncefield incident was the biggest explosion, and the accompanying fire was the biggest fire, in peacetime Europe. Twenty-five different fire services tackled the blaze with 600 fire fighters.

The explosion and subsequent fire:

  • destroyed some 5% of UK petrol stocks and destroyed 20 fuel tanks;

  • Injured 200 people; 2,000 were evacuated;

  • damaged more than 300 houses and required 10 buildings to be demolished;

  • caused all the schools in the county to be closed;

  • cost local businesses and local authorities £1 billion: it impacted 600 businesses and prevented 25,000 staff from getting to work;

  • disrupted global air traffic schedules and local transport;

  • caused businesses to suffer disruption of supply;

  • caused many organizations to invoke their BC plans;

  • made big retailers re-assess their supply chain issues;

  • forced companies to make public statements to protect their share value;

  • created major environmental impact from millions of gallons of burning oil which required more than three million gallons of contaminated firewater with up to 40 different contaminants to be disposed of; it took 500 tankers five weeks to move it.

Other impacts were equally devastating:

  • By January 10, 2006, data recovery and communications restoration was still ongoing.

  • By January 11, 2006, 75 businesses employing 5,000 people were still unable to use their premises.

  • Insurance cover was inadequate to cover losses.

  • In August 2006, 2,700 claimants sued for a billion pounds in a case that will cost £61 million.

  • Supermarket chain Sainsbury’s closed three stores damaged by fire;

  • Brewers Scottish & Newcastle lost £10 million of stock.

  • Retailer Marks & Spencer closed a food depot, disrupting deliveries to retail outlets.

  • Fujifilm, 3Com Corporation, and Alcom buildings were damaged.

  • Andromeda Logistics’ distribution centre was evacuated: operations resumed on December 12 from their alternative distribution center.

  • Shares in British Petroleum, a bystander, briefly dived.

  • ASOS (As Seen On Screen), an online fashion retailer, lost its new warehouse with £5.5 million stock (19,000 orders were refunded).

  • British Airport Authority rationed aviation fuel at Heathrow: airlines diverted to other European airports to refuel.

  • Broadcasts on BBC radio and television news urged motorists to avoid panic buying of fuel.

  • The HQ of XL Video, a video producer for trade shows, events, television, and concerts, suffered structural damage. They had 12 projects to load on the Monday morning. Their BCP diverted projects: all shows were shipped on December 12.

  • IT outsourcing company Northgate Information Solutions Ltd had backups ready for collection at 07:00 hours daily, but the fire happened at 06:00. Local tax payments went uncollected, and billing information for utility companies was lost.

Hertfordshire County Council’s crisis management plan worked: it had been used at the two rail incidents at Potters Bar and Hatfield and been thoroughly tested in October 2005.

Conclusion

Wise executives have long known the importance of risk and impact assessment and the need for contingency planning. With today’s threats, this has never been more important. Buncefield proved the need to:

  • develop a BCP to protect reputation, brand, and share value and market share;

  • communicate to key stakeholders;

  • communicate to emergency services and staff;

  • keep investors and customers informed;

  • have alternative sites for operations and for a control center;

  • read and understand the emergency plans of the local authorities;

  • ensure that key standby resources are in place, such as information (status, contacts); accommodation (operations and work area); and reserves (stock, spare equipment, etc.).

Buncefield cost local businesses £70 million, much of it uninsured. It is imperative to check insurance cover. The impact of a major disaster could last for months, or even years.

Notes

1 Oxford Metrica, www.oxfordmetrica.com

2 British Standards Institute/Business Continuity Institute Publicly Available Specification 56.

Back to Table of contents

Further reading

Books:

  • Hiles, Andrew. Business Continuity: Best Practices—World-class Continuity Management. Brookfield, CT: Rothstein Associates, 2007.
  • Hiles, Andrew. The Definitive Handbook of Business Continuity Management. 2nd ed. Chichester, UK: Wiley, 2007.
  • Hiles, Andrew N. Enterprise Risk Assessment and Business Impact Analysis: Best Practices. Brookfield, CT: Rothstein Associates, 2002.
  • Von Roessing, Rolf. Auditing Business Continuity—Global Best Practices. Brookfield, CT: Rothstein Associates, 2002.

Websites:

Standards:

  • BS 25999 Business Continuity Management (UK)
  • HB 221 Business Continuity Management (Australia)
  • NFPA 1600 Emergency Management and Business Continuity (USA)

Back to top

Share this page

  • Facebook
  • Twitter
  • LinkedIn
  • Bookmark and Share