--> Gill Blog: October 2005

Gill Blog

Monday, October 31, 2005

Halloween Treats

My kids think I should take the opportunity, today, to say something on my business blog about Halloween, and maybe even post a cartoon. "C'mon dad," they're pleading.

I did see a Howell-o-ween Special for Blawg Review, today.

In the spirit of Halloween, readers of Gill Blog might enjoy the reference these lawyers make to Bobby "Boris" ("Monster Mash") Pickett's musical effort to combat global warming.

Kids, heh.

Thursday, October 27, 2005

Eliminating Predatory Pricing in the Wake of Disasters

As a follow-up to our post on public-private partnerships in disaster zones, and the session we heard via conference call from Islamabad, my friend Jim Finch brought up a very thought provoking question. We had been told that potential is always there for disasters to motivate suppliers to engage in predatory pricing (i.e. setting prices for needed goods far above market prices when supplies are temporarily cut off - a better definition is available here). Jim asked the group how this can be stopped.

Some suggested that legislation be drafted that makes such behavior a criminal offense, others talked about public-private partnerships pooling resources to provide an inventory of critical items that can be accessed during a disaster. I thought about it and remembered the first time hearing about predatory pricing was in the aftermath of Hurricane Andrew in 1992. I just remember that being a very big story in the days that followed.

Since that time, the media has played a very important role in disuading potential pricing predators from acting, simply by using the public airwaves to identify and publicly punish those who do (identifying perpetrators can significantly damage their reputation and brand).

It also seems that we have entered a period where our collective antennae are far more attuned to the idea that large disruptive events will occur. When this becomes part of the group psyche of people, they have a tendancy to better prepare themselves for these types of events. As awareness and preparedness grows, the incidents of predatory pricing will drop because those who contemplate it think twice, because there is much more negative public opinion associated with it.

Wednesday, October 26, 2005

Public-Private Partnerships in Disaster Management

I sat in on a session this past week that featured an hour-long conference call from an on the scene emergency worker from a global 100 firm who was calling from the scene of the recent Pakistan earthquake. Beyond the descriptions of what we have routinely become accustomed to in the two weeks since the earthquake - frantic efforts to rescue stranded survivors in the mountains, and emergency services being stretched to the limit (he mentioned just returning from a hospital in Islamabad with 300 beds, now struggling to handle 1,200). We were also fortunate enough to hear his perspective on things we don't normally hear about in such urgent circumstances.

For one thing, he spoke about how such events provide the perfect opportunity to create public/private partnerships to enhance response. By combining forces both entities can effectively eliminate redundancy, reduce loss, save lives and improve productivity. These factors are particularly important when it comes to repairing infrastructure such as roads, or water pipes and reducing the liklihood that things like digging up a road only have to be done once. Working together can reduce costs and reduce the likelihood of having to do things twice. In addition, parterships on this scale can establish minimum standards and best practices that can be put to immediate use.

I saw first-hand the value of how the private sector can put its best foot forward when I dropped into my local Wal-Mart last week. When I was checking out, I was asked if I would like to donate a dollar to earthquake relief in Pakistan; when I said yes, the checkout clerk simply pointed her bar code reader to a code that was pasted on the register, and it was immediately added to my bill. I thought about how many people would check out in that store on that day, the number of days Wal-Mart would be collecting, and the number of Wal-Mart stores who would be participating in this initiative throughout the world. Just amazing.

Of course one of the keys to making sure public/private partnerships can move forward is to ensure they move beyond the realm of partisan politics. In this session we heard horror stories from Sri Lanka about villages being denied critical services and supplies because of the way that community may have voted in the past. If these types of hurdles can be overcome, the upside is tremendous.

So much so in fact that the UN is beginning to acknowledge the value of these partnerships and now trying to take a more active role in coordinating their formation. The following article identifies some of the reasons why such partnerships make sense:
Unfortunately, most mega-cities are located in developing countries, with few financial or human resources to allocate to natural-disaster-risk reduction. The lack of urban-planning capacity often explains additional urban risk factors, such as badly designed or poorly constructed buildings and infrastructure.

The quality of housing construction and infrastructure is therefore essential to reducing disaster vulnerability in urban environments.

This is the main reason why natural disasters disproportionably affect the poor. Poorer sections of urban populations often live in high-risk locations, such as steep or unstable hillsides and unclaimed terrain, which are especially prone to natural hazards. The poor build cheap, reside in the most unsafe settlements, and are the first at risk.

...Public-private partnerships could also contribute to hedging urban risks, by bringing together finance and governance experience.

We'll provide some thoughts on the effects of predatory pricing in disaster zones, and how this practice can be curbed effectively.

Monday, October 24, 2005

Hurricanes Decimating Florida's Insurance Industry

As hurricane Wilma lays yet another beating on the gulf coast region of Mexico and the United States, someone has to be thinking about how the insurance companies are handling all this. It's funny, I just took a break from writing this piece when I was called by a friend who told me to take a look at the cover of today's Wall Street Journal, and check out an interesting article titled Hurricanes Squeeze State Insurers of Last Resort. This quote gets to the crux of the problem:
State governments in Florida, Louisiana, Mississippi and elsewhere created the insurers to cover homeowners unable to get policies from private companies that are retreating from higher-risk customers. But the unusually large number of hurricanes that have slammed into the region during the past 14 months threatens to overwhelm the government-backed insurers and could lead to sharply higher rates for every policyholder in those states.

...Even a glancing blow from a weakened Wilma, which is expected to make landfall today in southwestern Florida, would worsen the financial crisis because the storm will wreak damage throughout densely populated areas along both coasts where Citizens has heightened risk exposure.

"It is not a system that is working," says Jeffrey Grady, president of the Florida Association of Insurance Agents, a trade group in Tallahassee, Fla.

Actually, I was going to blog a conversation I had with a friend last week who works with one of the large insurance companies in the US, and we began discussing this very subject. If you have followed this blog, you will know that one of the main themes we have periodically dicussed is the issue of how precariously perched the insurance industry is as a result of things such as the need for terrorism insurance and the need for governments to backstop the primary providers of coverage. Well, one thing we haven't discussed is how climatic change in the gulf is affecting providers along the gulf coast. It's not a pretty picture.

My source told me among other things that Katrina imposed a $1.55 billion loss on Florida's largest insurer. Another one of the big 3 or 4 insurers in Florida has actually formed a seperate LLC in Florida that allows the parent company to be insulated from losses. By creating a seperate entity, this company can completely revamp its pricing structure to insulate itself from the increased incidence of catastrophic hurricanes. On a longer term basis, many of the insurers want to pull out of Florida altogether, but are being swayed by political pressure and state insurance commissioners (the Citizen's Fund) who need these companies to remain in place.

Faced with mounting losses, and no easy escape hatch, the plan is to first shy away from coastal regions, bump up premiums (some have received approval for 22% price hikes), and engage in a standardized policy of non-renewal for as many cases as possible (one of these insurers has already targeted 240,000 non-renewals).

The bigger issue here is how the potential loss of insurance coverage will affect the economies of the areas where non-renewal will become standard. If I were a business operating in a coastal area that couldn't get coverage, I'd probably think twice about investing too much into my business. The macro effects of these trends will become truly mind-boggling.

Sunday, October 23, 2005

Carnival of the Capitalists blogs Gill

Carnival of the Capitalists #107, the weekly roundup of the best of the business blogs, has picked up a post from Gill Blog and nicely sandwiched it between two other posts that will be interesting to our readers here.
Professor Glenn Reynolds, the Instapundit, has some good ideas:
Some 21st Century Ideas on Energy and Employment

With gas prices skyrocketing, people are looking once again at ways to save energy. Unfortunately, while high gas prices bring back memories of the 1970s, the policy solutions that some people are bringing forth seem about as dated as shag carpets and leisure suits.

Tony Gill at the Gill Blog specializes in Workplace Continuity and has been writing about telework as a business continuity strategy:
Connecting Telework to Broadband, BCM and Gas Prices

I came across a piece the other day that was just fascinating, as the primary basis for justifying telework was made by correlating the costs of broadband with the cost of gas.

The Wired GC is thinking ahead:
Flu Pandemic and Disaster Planning

Hurricanes Katrina and Rita have provided real-time stress testing for the disaster planning of many businesses. Not all have fared well; many are now doing things differently.

Amid the stories about a possible worldwide flu pandemic, one planning difference becomes apparent: while hurricanes and other severe natural forces impact people and physical structures, the flu only hits people. And keeps hitting–a flu pandemic comes in waves and can last for months.

We're working on something about business continuity planning for law firms, as well, which will be posted soon.

Thursday, October 20, 2005

Campus Continuity Goes Mainstream

Just got back to the office after addressing the 38th Annual CAAT Facilities Conference hosted by Conestoga College in Kitchener, Ontario. This is an annual meeting of Ontario's colleges and institutes and this year the theme seemed to be a familiar one - risky business. The agenda of the conference reflected the important role played by facilities personnel play at their institutions in creating and ensuring a s safe, supportive environment for students and staff.

It was coincidental that this year's conference focused on a theme that closely aligned with our Campus Continuity program that we launched in the spring. Not suprisingly, my topic was Campus Continuity, and I used the opportunity to point out to administrators that in order for campus risk to be adequately addressed, it is very important for administrators to think beyond issues of public safety, and consider things such as the financial dimension of disruptive events.

I began the session by discussing the major components of a business continuity plan, then did something a little different - I asked the audience to assume the City of New Orleans was a business, and as a business, I asked them to evaluate how all the components described in section 1 were met. Finally, I said that if we were so presumptuous to liken a city to a business, why couldn't we use those same standards in evaluating how an educational institution uses these practices.

I have a condensed version of the presentation I will post on the site in the next week or two.

Friday, October 14, 2005

Connecting Telework to Broadband, BCM and Gas Prices

Let's play the time machine game for a minute. We'll start by getting in and setting our coordinates back about ten years to late 1995, or early 1996. Although you have recently witnessed the worst act of terrorism on American soil a few months ago at a federal building in Oklahoma City, the whole notion of risk management and business continuity seems better understood in the IT department.

Gas prices are sitting around a buck a gallon, and this crazy thing called the internet is starting to gain a little momentum. In fact, if you're willing to pay on a per-minute basis, you can hook up an internet connection to your phone line at home. By doing so, you can access the latest html-based web pages (and impress your friends using the term "html") at the snap of a finger (well, maybe the snap of a tree trunk in a redwood forest, given the transfer rates of data on a low bandwidth home connection).

You start to think that the time may be right, and you now have the ammunition required to go to your boss and ask what he thinks about setting you up in a remote teleworking arrangement. You unfortunately make that request while he's having a sip of water, because as you finish, he laughs so hard that you're directly in the line of fire of the water spray he spits from his mouth (unfortunately, dry cleaning costs are pretty much the same as they are today).

Prospective teleworkers need not despair. It's time to go Back to the Future, where the world has changed significantly and the stars may actually be working in your favor. For one thing, large scale risky events have become commonplace, so much so that organizations frantically try and keep their business continuity plans updated.

Slow bit rate transfers are now regarded by most people the same way an MP3 aficionado views a 78 RPM phonographic record. Broadband's everywhere, and this can now be used to create a virtual office on an anywhere-anytime basis. Gas prices? Let's just say that when prices in Atlanta briefly topped the $5 a gallon mark a little over a month ago, the times can be characterized as being a little different.

Okay, okay enough of the cute storytelling, I came across a piece the other day that was just fascinating, as the primary basis for justifying telework was made by correlating the costs of broadband with the cost of gas. Check this out:
But there's also an economic driver that's emerged in the past few months and for macroeconomic reasons appears here to stay. For the first time in U.S. history, consumer bandwidth is less expensive than consumer fuel. Think about it: The going rate for broadband connectivity to the home is up to $50 per month (though some business-class services may run as high as $150 per month). If the going rate for gasoline is $3.70 per gallon, those monthly broadband expenditures will buy about 350 to 1,000 miles of commuting (figuring a 25-mile-per-gallon vehicle). That's the equivalent of a daily commute of between 17 and 52 miles. By enabling employees to work virtually, you're allowing them to save what's rapidly becoming a significant line item in their budgets.

Wow, isn't that something? Who could have made a prediction like that just ten short years ago? Just goes to show how quickly the landscape changes, and how much more sense telework makes today.

Wednesday, October 12, 2005

SMEs Don't Plan for Business Continuity and Telework

Jo Verde from JeMM Consultants sent me some interesting tidbits over the past couple of weeks that neatly tie into some of themes we discus on this forum. To begin, consider the following item revealing that despite the urgency of maintaining a business continuity plan, a large number of small to mediums sized enterprises (SMEs) do not have any business continuity plans in place, but could significantly enhance their survivablity if such plans were put in place:
The London Chamber of Commerce (LCCI) - which represents 3,500 predominately small businesses - says that up to 44 per cent of small and medium-sized firms have no contingency plans in place and many of those that do fail to communicate to their staff effectively about what needs to be done in the event of a major emergency incident...

"The chronic lack of preparedness on the part of small and medium-sized firms is the greatest avoidable threat in the capital today," said LCCI president Michael Cassidy. "Directors owe it to themselves, their employees and other firms in the supply chain which depend on them to take action now."

We always on the need to integrate telework into business continuity planning. Although it makes perfect sense to us - especially in areas that might be vulnerable to a disruptive event - it seems as though the message just isn't getting through. This view is supported by the following press release:
Nearly two-thirds (62%) of mid-sized UK businesses make no provision for staff to work from home in the event of disruption or disaster, while less than a third (29%) have updated their business continuity plans since 7 July...

While two in three (63%) mid-sized organisations claim to have business continuity plans in place, in London this falls, alarmingly, to one in three (33%). In the event of being shut out, few employees would have access to the corporate network or even a list of contact details for their colleagues and clients.

It's interesting to also note that this piece points out that not only do a number of SMEs lack business continuity plans, but they seem to be unable to grasp the consequences of taking preventative action:
“With business continuity, it pays to be pessimistic – whilst large enterprises are more aware of the risks, small to medium businesses need to wake up and make preparations fast. As the research shows, many businesses aren’t even backing up data off-site – a simple and cost-effective means of protecting against data loss and ensuring business survival.

“The technology now exists to allow staff to easily work from home as if in the office simply by plugging into a broadband connection. But an alarming number of small and medium businesses are failing to plan for when offices can’t be accessed or for network failures.”

We'll have a couple of comments to make about broadband in the next post.

Thursday, October 06, 2005

Google, Sun Microsystems and Workplace Continuity

A couple of weeks ago, we took a break from the fallout of Katrina to discuss the rise of Google. We, like others, speculated about what Google had up its sleeve to further its dominant position and suggested that because they were in the midst of hiring a bunch of OS guys they could very well be developing an operating system for the internet at a very powerful level, and much the way Microsoft did for PCs.

Well, they got a little closer this week as it was announced on Tuesday that Google and Sun Microsystems struck a strategic alliance to apparently go head to head with Microsoft's Office software. One of the things we were speculating quite plainly spelled out here:
Eventually, the partnership could lead to Google offering word processing, spreadsheet and collaboration tools that would compete with Microsoft's industry-leading Office suite of software.

Powerful office tools available anywhere there's an internet connection? Working on an anywhere, anytime basis? Seems as though more pieces in the Workplace Continuity puzzle are coming together.

Monday, October 03, 2005

Workplace Continuity Affects Roles of Senior Management

Change seems to be a recurring discussion theme within public and private organizations globally. Whether this is driven by the decline of manufacturing in North America (and the consequent rise in knowledge-driven organizations), the impact of globalization, reconfigured management structures, or the higher profile of enterprise risk management (ERM), change is indeed afoot.

If this is accepted as a given, it becomes incumbent upon executives to grow their organizations, in part at least, by redefining the roles of those who execute senior policy directives. This all ties in very closely with the underlying principles of Workplace Continuity. The connection points are fairly straightforward: organizational policies are changing because of a combination of factors are colliding simultaneously, including:
  • Globalization
  • the trend toward flatter organizational structures
  • the rising costs of employee turnover
  • the impact of rapidly evolving mobile technologies
  • growing recognition of the need for better employee work/life balance
  • the growing
    ubiquity of broadband that facilitates the expansion of telework
  • greater risks associated by manmade, naturally occurring and technologically-based phenomena
  • the need to better manage facility and overhead costs

Clearly, the dynamics of the workplace are in the midst of substantial change, and to remain competitive, organizations need to keep pace. So what’s the macro effect of workplace continuity on an organization? The impact of risk and business continuity planning is on the front burners of many organizations; therefore a more structured approach to ERM is required. The main challenge for the organization is to move to a point where it can connect a number of seemingly unrelated functional areas.

A growing number of organizations profess to having existing ‘plans’ in place, but the overriding question is how holistic are these plans and to what extent do they integrate multiple areas of risk on a uniform platform? For one organization, that plan may be focused on how to evacuate employees from a site in the event of a disruptive event; another sees this as an exercise in preserving valuable data by choosing one of a number of readily available backup strategies; a third might be weighted more toward quantifying intangibles and calculating how a ‘bad’ event may negatively impact their brand; while another will look at how risk can be somehow managed by using the assets within its real estate portfolio. Certainly, these are all valid concerns, but the real test is how well are these areas connected along a common continuum? Experience thus far has shown that organizations still tend to manage these functions at a very narrow bandwidth and within well-fortified silos. The result is a number of individual silos with a lot of white space (a.k.a. scant communication) between them.

The goal then should be to shrink that white space by better managing risk, costs and operational efficiencies. It would seem logical that the point where these initiatives can find some common ground is through one function that brings it all together. Because bricks and mortar seems to be a common denominator – place, as we know is where everything happens – it stands to reason that facilities personnel could conceivably quarterback or project manage the entire process. If your real estate executives gain a better understanding of workplace continuity principles – everything ranging from a fundamental understanding of emergency management, business impact analysis, and data backup – they can integrate this knowledge and form better working relationships with those who control the silos, and ultimately use this knowledge when putting together a comprehensive organizational facilities strategy.

By no means are we suggesting that the onsite facility manager should be managing the critical data or crafting its emergency response plan, but an efficient configuration of the workplace will at least in part be made more efficient if facilities personnel are empowered to better connect the dots. It may seem overly ambitious, but it just makes good business sense. As the dynamics of the workplace undergo transformation on an unprecedented scale, so too will the skill set requirements of those whose traditional roles have remained static, as they will have to adapt to the changing roles and responsibilities associated with workplace continuity. If executed properly, the organization will be rewarded with greater operational and financial efficiencies realized by making traditional organizational roles more cross-functional.