When a natural disaster strikes, it is also a time to test the organization of the enterprise

Improve organizational resilience-how do companies respond to public emergencies?

When a natural disaster strikes, it is also a time to test the organization of the enterprise

On July 20th, Henan Province encountered extreme heavy rainfall. The daily rainfall of many national meteorological observatories in Zhengzhou exceeded the historical extreme value since the meteorological record. According to the relevant provisions of the “National Emergency Plan for Flood Control and Drought Relief”, the General Administration of National Defense has decided to upgrade the emergency response of level III to level II at 3 o’clock on July 21.

Continuous heavy rainfall has caused many roads, subways and other public facilities to be flooded and people trapped, seriously threatening the lives and property of the people. At the same time, large and small enterprises in Henan Province are facing the test of natural disasters. Normal production and operation have been severely disrupted, and the economic losses are immeasurable.

In fact, public emergencies led by natural disasters are a “study exam” and even a “random physical examination”. Both large and small companies need to take precautions and actively respond. After all, surviving companies will become Stronger, the organization’s resilience will also be stronger.

Once public emergencies such as natural disasters, terrorist attacks, and epidemics occur, employees of the company suffer direct or indirect injuries (casualties, loss of connection, restricted movement, etc.), and the normal production and operation of the company are severely disrupted, resulting in heavy losses or even bankruptcy. . According to public data from the Ministry of Emergency Management, there were more than 10 public emergencies including the Yushu snow disaster in Qinghai and the super typhoon “Lichma” in 2019 alone.

In the face of unpredictable but increasingly frequent public emergencies, why are some companies able to “immunize” and survive, while others panic and even endanger their survival? How should companies respond to public emergencies?

Public emergencies that have had a major impact on enterprises since the 21st century

2001

The 9/11 terrorist attack in the United States: The World Trade Tower and many nearby buildings collapsed, killing nearly 3,000 people and preventing thousands of businesses from operating.

Year 2003

SARS atypical pneumonia epidemic: Infected 8,069 people worldwide, and died 774; the scale of short-term social financing declined, and GDP growth slowed down.

year 2004

Hurricane Catarina, Brazil: Lasting for half a month, 40,000 houses were damaged, and the economic loss is estimated to be US$350 million.

Year 2008

Wenchuan Earthquake in China (March 8.0 on the Richter scale): Nearly 70,000 people were killed, 370,000 were injured, and nearly 20,000 were missing; all counties and cities in 9 provinces, including Sichuan, the epicenter, were affected, with 15,000 companies in Sichuan alone Disaster.

year 2011

The Great East Japan Earthquake (magnitude 9.0 on the Richter scale): More than 15,000 people died, making it the fifth largest earthquake in the world since 1900; the earthquake triggered a tsunami and caused a leak at the Fukushima nuclear power plant; Japan’s electronics and automobile industries suffered heavy losses, and agricultural fishing The industry suffered heavy losses due to the irreversible environmental damage.

Year 2014

Ebola virus outbreaks broke out in African countries such as Guinea and Sierra Leone: The World Health Organization declared the Ebola outbreak a “public health emergency of international concern”, with more than 4,000 deaths; the economic development of many African countries was affected, and some foreign-funded enterprises withdrew out.

2019 year

The violent attack on the police in Hong Kong: lasted for nearly half a year, resulting in negative economic growth in Hong Kong in the second half of the year and a sharp decline in the service industry.

2019 year

Typhoon Lichma landed in Zhejiang: Some enterprises in nine provinces and cities including Zhejiang, Shanghai, Jiangsu, Anhui, Shandong, etc. suspended work, some of their factory buildings were damaged, 15 million people were affected, and the direct economic loss was 51.53 billion yuan.

2020 year

Novel coronavirus infection pneumonia epidemic: enterprises across the country postpone the resumption of work.

What is a public emergency?

This article analyzes the three types of attributes of public emergencies based on the event system theory, including intensity (novelty, criticality, subversiveness), time (timing, duration), and space (the distance between the entity and the event, the scope of spread, etc.).

From the perspective of event intensity attributes, in recent years, public emergencies are relatively low in novelty, but they are extremely disruptive and critical. People are no strangers to events such as epidemics, earthquakes, typhoons, and terrorist attacks. Related news and reflections frequently occupy the headlines of various media. However, entrepreneurs may have the cognitive bias of “gambler’s fallacy”, believing that similar public emergencies will not happen again and again; or have a tendency to be overly conceited, believing that even if they happen, they will not affect themselves.

However, once such an incident occurs, the flow of people, logistics, information, and capital of the enterprise will be different from usual or even interrupted. It will face casualties, damage to the factory, interruption of communications, water and electricity, road blockage, suspension of upstream and downstream supply chain enterprises, and IT System downtime, temporary government regulation, market shrinkage, etc.

For example, in the terrorist attacks of September 11, 2001, more than 500 employees of financial companies were killed in the collapse of the World Trade Center, and the trading systems and data of many securities companies were wiped out. During the new crown epidemic in 2020, the government has introduced temporary control measures, companies have suspended or restricted resumption of work; the tourism industry has been hit hard, and the catering, hotel, and aviation industries are also at risk. It is precisely because of the decrease in the novelty of public emergencies in recent years that enterprises lack a sense of crisis; and the constant high degree of subversiveness and criticality has caused every public emergencies to cause great damage to enterprises in all aspects.

From the time attribute of events, the timing of public emergencies is extremely random. In the book Burst, Joichi Ito mentioned that “precautionary measures (for public emergencies by enterprises) follow the “logic of the industrial age””, and the randomness of events makes enterprises hard to guard against. In addition, the duration of the incident itself and its impact is usually longer, such as the time for personnel treatment, the time for the restoration of infrastructure, and the time for the restoration of social order. For example, the southern snow disaster lasted for one and a half months in 2008, and all 20 provinces across the country were affected by low temperature, rain, snow, and freezing disasters to varying degrees. Days of heavy snow and freezing rain broke cables and electrical towers, causing long-term power outages in many provinces and cities; multiple signal and communication towers were also broken, causing mobile phones to be out of signal for many days in some areas; transportation was stagnated for more than half a month.

When a natural disaster strikes, it is also a time to test the organization of the enterprise

From the perspective of the distance between the entity and the event and the scope of its spread, public emergencies will have a significant impact on both local and non-local enterprises. With the deepening of globalization, the evolution of value chains, and the formation of a “community of destiny” among enterprises, the ties between enterprises have become closer, and the scope of influence of public emergencies can hardly be controlled in the place where they occur.

For example, a 7.6 magnitude earthquake occurred in Taiwan in 1999 and the chip factory in Hsinchu was forced to suspend production, which also caused drastic fluctuations in the global chip market. According to related reports, the new crown virus pneumonia epidemic has caused Hyundai Motor, which is as far away as South Korea, to suspend all production lines in South Korea. The reason is that the supplier of the third component wiring harness is from China, and the supply of parts and components in China is interrupted and existing inventory is exhausted. The “collateral damage” of automobiles; a precision processing and manufacturing company engaged in mechanical parts such as bearings and gears in St. Petersburg, Russia, because its primary materials are from China, but none of its Chinese suppliers can start operations normally due to the epidemic. Therefore, the company bears the burden of overseas importers. Product delivery pressure, all we can do is to wait further.

How do companies respond?

Based on the event system theory, enterprises can consider the three stages of public emergencies before, during and after the incident, to help enterprises improve their own immunity and resilience, reduce the impact of public emergencies on enterprises, and quickly recover from public emergencies. Recovery from the negative impact.

Beforehand: Establish a business continuity mechanism

Business Continuity Management (Business Continuity Management) originated from IBM’s disaster recovery plan in the 1970s. Business continuity management is an enterprise’s comprehensive management process in response to emergencies, which can help enterprises identify potential threats that impact the organization’s business operations, ensure the continuity of the organization’s business operations, and reduce the impact of various emergencies on the sustainable operation of the enterprise. Before a public emergency occurs, companies need to be prepared for danger in times of peace and adopt the following four types of strategies to establish a business continuity management mechanism.

1. Establish an enterprise “emergency meeting” 

Enterprises with conditions can set the emergency management committee (“emergency meeting”) as a permanent institution, and senior professionals (such as infrastructure personnel, IT personnel, PR personnel, etc.) as members of the emergency committee. Small and medium-sized enterprises with limited resources do not need to establish emergency meetings, but the functions of emergency meetings should still be assigned to the leaders of each team, and each team should make its own emergency plan. The emergency committee members should analyze various public emergencies, identify the key business (type, priority, process, resource allocation, recovery time objectives, etc.) to be restored in the emergency, and formulate emergency response, information release and other management plans. The purpose is An emergency that becomes chaotic and disorderly becomes an emergency that is calm and orderly.

Thanks to this, the major domestic commercial banks performed well in the new crown epidemic, and quickly completed the adjustment of their business focus and IT system, and prioritized the transfer payment business and loan business to ensure the funds needed for epidemic prevention and control. It is in place in time to meet the daily transfer payment needs of residents and the loan needs of enterprises that lack funds to resume work.

When a natural disaster strikes, it is also a time to test the organization of the enterprise

The emergency meeting should also obtain the authorization of the board of directors to direct the emergency response of the enterprise during the public emergency. Professor Karl E. Weick once studied such a case. In the fire disaster of Mann Canyon, Montana, USA on August 5, 1949, neither the captain nor the team members followed the most. The experienced Wag Dodge’s command of “discarding tools” ultimately resulted in the sacrifice of 13 firefighters including the captain. Only Wag Dodge survived. Professor Karl Wick concluded that Wag Dodge’s command was correct, but he had no authority.

2. Key resources are configured in pairs

Enterprises should establish ” spare tires ” as soon as possible around key IT systems and data, key employees, key supply chains, and key office spaces to improve resilience in adversity and create basic conditions for the continuous operation of enterprises during public emergencies. For example, during the 9/11 terrorist attacks, although the main data center of the investment banking giant Morgan Stanley ceased to exist with the collapse of the World Trade Center, the company continued to work as usual the next day by relying on its remote disaster recovery data center and IT system to be activated in time. . In view of the high cost of establishing a spare tire, small and medium-sized enterprises can allocate asymmetric resources without the need for one-to-one correspondence between the main and spare tires to reduce the resource input of the spare tire.

3. Desktop exercises, actual combat exercises

Enterprises should not be satisfied with the “paper talk” of plans and plans. They should also conduct tabletop exercises and actual combat exercises to find shortcomings in enterprise emergency management, so that they have convex characteristics and enhance their anti-fragility capabilities.

For example, the Swiss bank where the author works will conduct a counter-terrorism exercise (a raid, without prior notice to employees), a public health incident exercise, and two earthquake exercises (one of which is a raid). It has participated in many cooperation partners such as China UnionPay . exercise. UBS repeatedly exercised response plans in situations such as casualties, building bombings, data loss, communication and power interruptions, and partners also encountering emergencies, which has well cultivated employees’ crisis awareness; emergency operations procedures such as “muscles” “Memory” is engraved in the minds of employees; companies also identify such things as unstable network of disaster recovery sites, incomplete customer data in disaster recovery IT systems, inability of business departments to provide financial products urgently needed by customers, and poor information release and circulation. Many “small mistakes”.

4. Leave some redundant resources

Companies must keep certain cash reserves, retained earnings, capacity reserves, etc. Inamori Kazuo mentioned in his book “How to Live” that when he was young, he heard a speech by Matsushita Konosuke. The content was “Operating a business should be like storing water in a reservoir, and be prepared for a downturn during the boom.” We must retain a reserve force, and we must have the determination to never give up unless we build a reservoir.” If the company does not maintain a certain amount of redundant resources, it is difficult to survive public emergencies.

In 2003, New Oriental suspended classes for 4 months due to the SARS epidemic. A large number of students refunded fees and nearly all staff closed the shop. Because it did not retain enough redundant funds, New Oriental’s cash flow was facing collapse. Yu Minhong urgently borrowed 7 million yuan of funds to get through the border. While China Vanke is a typical representative adhere to the “cash is king”, since the establishment of the focus on rapid sales, fast back section and improve capital efficiency. According to the public financial statements, Vanke’s cash ratio has been at a high level in the industry for a long time, helping Vanke survive the “winters” of one industry after another, including SARS.

In the event: improvise, abide by ethics

The establishment of a business continuity management mechanism in advance can ensure that enterprises can quickly and orderly restore the normal operation of corporate people, finances, materials, and information when public emergencies occur, and minimize the damage to production materials caused by public emergencies , Lay the foundation for the sustainable operation of the enterprise. On this basis, how to face the instantaneous change of the market during the event, or even turn crisis into opportunity, is the next challenge that companies have to face.

1. improvise

In the face of public emergencies or irreversible losses, whether an enterprise can improvise determines the life and death of an enterprise. Enterprises should make full use of all resources that can be mobilized to develop the “unconventional attributes” of resources. For example, during emergencies, if you can’t do it alone, you should stay in a group for warmth. During the COVID-19 pandemic, more than 1,200 people from more than 20 catering companies, including Yunhai Cuisine and Youth Restaurant , joined Hema’s temporary labor force and started the “shared employees” model. The temporary employment method of “part-time job” has benefited many parties.

During the new crown epidemic, JD ’s unmanned intelligent delivery robots flexibly shuttled through the streets of Wuhan and quickly delivered anti-epidemic materials to frontline hospitals; DJI drones cooperated with pilots to spray on major streets in Henan, Shandong, Zhejiang and other places. Disinfectant is used for prevention and control propaganda in residential communities through mounted megaphones. This not only avoids the impact of the new crown epidemic on companies’ suspension of work and production restrictions, but also urgently needs the country and society, resulting in a win-win situation. In an era of uncertainty, companies must learn to embrace change and improvise and dance with “events.”

When a natural disaster strikes, it is also a time to test the organization of the enterprise

2. Abide by business ethics

In the course of public events, companies must abide by business ethics, take the initiative to assume social responsibilities, and enhance social and reputation assets. Some companies have used public emergencies to conduct event marketing, but marketing through public events is like a dance on the tip of a knife, and the risk is extremely high. When the Iraq War started in March 2003, Uni-Lubricant ‘s advertisement of “more lubrication and less friction” expressed the voice of opposing the war and praying for peace, which aroused social resonance. The market share rose from 14% to 40% that year. However, if companies ignore business ethics, misjudgment risks, and miscalculate marketing standards and public perceptions, they will lose their reputations and lose their reputations if they blindly “snap hot spots and gain attention”.

After the event: summary reflection, quick recovery

1. Reflect on lessons, learn from experience 

After public emergencies, companies should encourage frank discussions about failures, summarize the experience and lessons in handling public emergencies, and form organizational conventions for future reference. For example, JPMorgan Chase Bank has recorded and summarized all public safety incidents and emergency response during the more than 150 years since its establishment for employees to learn and discuss.

After the 9/11 terrorist attacks, JPMorgan Chase Bank also invited the employees involved to report on the improprieties in the emergency response and modify the emergency plan for the terrorist attack. China UnionPay takes the business continuity inspection of its partners every year very seriously, and exchanges and learns with each other to make up for deficiencies.

2. Fast recovery: speed up intelligence, digitization, and networking

Compared with light-asset enterprises, manufacturing and service enterprises, especially small enterprises, face greater impact in public emergencies. Enterprises should accelerate the pace of smart manufacturing and smart services. Big data can provide analysis and decision-making basis for the emergency handling of enterprises; artificial intelligence not only provides computing power far beyond human beings, but also avoids the company’s shutdown and production shutdown due to casualties in emergencies; blockchain can be used in emergency logistics process tracing displayed their skill.

It is worth noting that technology is easy to obtain, but concepts are difficult to implement. The traditional chimney-style system construction and clear boundaries between organizations have created information islands one after another, hindering the flow of information among enterprises, between enterprises and governments, and between enterprises and communities. Big data “smart women cannot cook without rice.” Manufacturing, intelligent services, intelligent analysis, and intelligent decision-making are even impossible to talk about. Companies should break the internal boundary (the boundary level of vertical, lateral boundaries of departments) and external borders (with suppliers, government, etc.) the barriers ; the establishment of internal self-driven, distributed organizational structure, the implementation of external open innovation; internal Empowerment rather than control, and opening to the outside world rather than closure can make the company’s digital innovation even more powerful.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/when-a-natural-disaster-strikes-it-is-also-a-time-to-test-the-organization-of-the-enterprise/
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