Companies failing to test continuity plans

Many UK businesses are failing to test the effectiveness of their business continuity plans according to a survey into risk management practices and attitudes to risk.

The survey is the second co-sponsored by the Institute of Directors and HSBC Insurance Brokers and was conducted between April and August 2007.

More than a third of the companies (39%) surveyed stated that their continuity plan had never been tested compared with 43% who said that they had not tested their plan in the 2006 survey.

Commenting on the survey, David Breden, managing director, HSBC operational risk consultancy at HSBC Insurance Brokers commented: “The latest survey shows that more than half (56%) of companies responding have formal business continuity plans which is about the same level as a year ago. This survey shows that organisations with a turnover of £6 million or above are most likely to have a plan while those with a turnover of less than £5 million are least likely to have a plan.

“If businesses practice their response to disasters they will be better prepared to manage their effects and reduce the negative impact on their firm.

David Breden, managing director, HSBC operational risk consultancy at HSBC Insurance Brokers

“While there has been a slight reduction in the number of companies who have not tested their plans on a year ago – from 43% to 39% - that is still a worryingly high level. Businesses need to test their continuity plans rigorously as many organisations have discovered who have had to cope with the impact of this year’s severe flooding.”

Breden added, “If businesses practice their response to disasters they will be better prepared to manage their effects and reduce the negative impact on their firm.”

The main threats to business, according to the survey, were considered to be loss of key staff and possible involvement in litigation. One in seven respondents (70%) identified the loss of key staff to be a significant threat while litigation or falling foul of regulation was the second highest response.

According to the survey – carried out by GfK NOP – around eight in ten organisations with a turnover of £1m-£20m. were most likely to consider loss of key staff as a significant threat to business in the future. Meanwhile, organisations with a turnover of £1m-£5m and above £500m were most likely to consider litigation or falling foul of regulation as a potential problem.