The events of 11 September have shattered the traditional concepts of our world. While acts of terrorism are sadly not unknown, they have never before resulted in a loss of this magnitude - both in human and business terms.
An attack of this type against a nation and its ideals is non-specific. It affects all companies everywhere. It does not discriminate between good or bad corporate governance or risk management. Its effects have an impact that goes far wider than its direct targets. And it brings home, unfortunately in the worst possible way, that any business can be hit by disaster.
The total cost of the US terrorist attack may never be known. Uninsured and economic losses are hard to quantify, while the business implications are snowballing. We have already seen companies failing or in serious difficulties in the aviation industry. Fears of recession and a cut in consumer spending are forcing companies in other sectors to change their business plans.
How will this affect the way that companies view risk? First, it brings home the fact that total risk and loss avoidance is impossible - although perhaps only the most complacent of companies would ever have claimed otherwise. Second, it highlights the importance of planning for disaster. It is to the credit of the major organisations affected by the World Trade Center attack that they were able to continue providing services to their clients at a time of great uncertainty and when employees were grieving for their colleagues. And third, for those companies that did not suffer direct loss but whose future is threatened nonetheless, it illustrates the need to take a broad view of risk management.
When a disaster occurs that affects the confidence of your customers in using your services - as has been the case in the travel industry - or to buy from you to effect their expansion into new areas, how do you deal with this? What strategies should you use to attract and retain key employees and demonstrate that their safety is paramount? How can you manage business interruption, perhaps in circumstances where it may be impossible to gain access to a key site and records have been totally destroyed? And, faced with an economic recession, whether in the wake of a national disaster or not, what steps can you take to compete successfully in a contracting market?
These are not new questions. Many CEOS, boards of directors, risk managers and others involved in protecting the future of their companies and the interests of their stakeholders will have been considering these and other issues. However, the 11 September tragedy has, for many companies, moved their thinking from the hypothetical to the actual.
We launched StrategicRISK in June 2000 with the endorsement of the UK Association of Insurance and Risk Managers in Industry and Commerce. Our aim is to focus on key risk and corporate governance concerns and highlight potential strategies and solutions. Next year, we will be supplementing our publication with a series of roundtable discussions on how to manage your customer, human capital, business interruption and competition risks. Clearly, no business can now afford to ignore these.
Finally, I would like to extend our deepest sympathies to all those affected by the US terrorist attack.
