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Home > Operations Management Checklists > Applying Stress-Testing to Business Continuity Management

Operations Management Checklists

Applying Stress-Testing to Business Continuity Management


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Checklist Description

This checklist explains how stress-testing and scenario analysis can aid business continuity management.

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Definition

Business continuity management (BCM) is an important component of the risk management framework for regulated institutions. It increases the resilience to business disruption that may arise from internal or external events and should reduce any adverse impact on business operations, as well as profitability and reputation.

Business operations have become increasingly complex over the years, increasing their vulnerability to disruption by outside events. BCM has thus become an essential part of a company’s risk management framework. A whole industry has sprung up devoted to supporting companies on BCM issues.

Although major disruptions to business are rare, few have forgotten the events of 9/11, which resulted in massive disruption to business. External threats from terrorism, computer crime, and viruses are unlikely to go away. Businesses need to put in place continuity plans that are consistent with the scale of their operations.

Stress-testing is crucial to an organization’s BCM and its planning for risk management. Stress-testing and scenario analysis both provide management with the information it needs to assess and adjust risks to the organization and to mitigate them effectively. They enable firms to understand how they should deal with certain threats, pick up on any shortfalls, and implement actions to improve their processes for BCM.

Wider use of BCM, stress-testing, and scenario analysis would have a beneficial effect on the robustness of the world’s financial systems. There is, however, no simple formula for a company to follow for its own stress-testing and scenario analysis. Depending on its size and global reach, each organization must formulate its own strategies and plans for testing its BCM processes.

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Advantages

Stress-testing of business continuity management should:

  • reduce the impact of disruptions to business operations in the event of a problem;

  • increase protection to stakeholders and beneficiaries;

  • promote confidence in the organization and the whole financial system.

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Disadvantages

  • The cost of planning and actions.

  • The time spent on the whole process.

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Action Checklist

  • Put a BCM strategy in place.

  • Set up methods and routines for stress-testing and scenario analysis.

  • Carry out regular tests.

  • Determine follow-up points.

  • Carry out any necessary actions to improve the BCM plan.

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Dos and Don’ts

Do

  • Review your BCM plans and processes regularly.

  • Identify actions to update your BCM as appropriate.

  • Follow up these actions.

Don’t

  • Don’t leave your BCM proposals unmonitored once you have put them in place.

  • Don’t restrict stress-testing to specific threats.

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Further reading

Books:

  • Hiles, Andrew (ed). The Definitive Handbook of Business Continuity Management. 3rd ed. Chichester, UK: Wiley, 2010.
  • Osborne, Andy. Practical Business Continuity Management: Top Tips for Effective, Real-World Business Continuity Management. Evesham, UK: Word4Word, 2007.

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