Disaster Recovery Planning: Lessons from Crisis Management

Introduction

Disaster recovery has become an important aspect of a company's strategic plan. The main reason for increased concern can be attributed to the fact that integration and alliances at an international level have grown, creating more linkages and higher interdependencies that expose businesses to international risk. This also means that companies are more prone to being affected by a force majeure event impacting a vendor located in another part of the world. Some cases that have recently come to light in the wake of the Japanese earthquake include the impact on General Motors, to say nothing of Nissan. Moreover, giants such as Sony were affected by natural disasters in Thailand, where a tsunami disrupted an integrated chip provider, making it difficult for Sony to continue manufacturing its products.

In light of these vulnerabilities, it becomes increasingly important for companies to properly plan contingencies and arrange for backup suppliers so that their operations are not disrupted. As the world moves toward ideal inventory conditions such as Just-in-Time inventories and single-source suppliers, the occurrence and frequency of natural disasters has made it imperative for firms to plan their risk exposure and aim for optimal disaster recovery solutions.

Literature Review

Much has been studied about the impact of disasters and how some companies have failed or succeeded in their responses. The first study evaluated here is titled "Service Impact Analysis Using Business Continuity Planning Processes" by Stewart Wan (Wan, 2009), who states that in the field of IT, problems arise because experts are relied on heavily to assist with business continuity planning yet no formal framework exists for conducting this work. The study also notes that IT management companies drive services very rapidly in a fast boom environment, which creates problems related to burgeoning human resources and management challenges. In such scenarios, companies tend to overlook vital components such as business continuity planning, as these are generally relegated to last priority given that the probability of such an event occurring is considered marginal.

The study also indicates that in the IT sector, new challenges in disaster recovery include the retention of expert workers and the maintenance of a detailed information base that can help counter any such attacks. According to the paper (Wan, 2009):

"BCP, it has been argued, forms part of a wider planning structure and process in business operations. In current business-aligned IT operations, the continuity plan needs to be integrated with ITSM if an organization is going to be able to manage fault realization and return to normal business operations. The materials presented in this paper aim to help organizations to better understand the inter-relationships of their underlying infrastructure and business service offerings. Traditional BCP and service continuity processes provide preventive and recovery solutions to reduce risks in business operations." (Wan, 2009)

Another paper (Scholtens, 2008) examines disaster and crisis management in the Netherlands, arguing that collaboration between administrative and operational management is essential. According to the research, when a disaster actually occurs, collaboration does work in practice. While the article emphasizes centrally managed collaboration, it also concludes that coordination during acute emergencies cannot always be achieved. The article goes on to indicate that although collaboration may not function optimally in the immediate aftermath of a disaster, it does aid in planning better contingencies by providing a broad view of the scenario and allowing various aspects of the event to be examined from multiple perspectives. Results are even better when the team is multidisciplinary, as it brings wider experience across various business functions. Considering the particular case of the Netherlands, crisis management is the responsibility of local government; however, participation from various agencies is based on voluntary involvement in the process.

The paper "Information Technology Disaster Recovery Plan: Case Study" (Omar, Alijani, & Mason, 2011) underscores the importance of computerized data to businesses today and indicates that disaster recovery planning is equally important for enabling businesses to continue functioning. This paper evaluates the case of Houston Community College (HCC), which implemented a disaster recovery plan following Hurricane Katrina. The college lost important data in the wake of that disaster, and the study indicates that effective recovery planning requires identifying critical data and establishing a clear recovery plan. In the case of HCC, the plan proved successful: when another hurricane, Ike, hit Houston, the implementation worked and the college continued to function without interruption. Quoting the paper (Omar, Alijani, & Mason, 2011):

"Implementation of the Disaster Recovery Plan using Oracle Data Guard to the Cyrus One Data Center ensured that the goal to replicate data and IT processes and procedures of critical applications was successful."

Another article (Jones, 2011) addresses Records and Information Management (RIM), noting that many companies, despite having business continuity management plans, lack proper data recovery procedures. This article discusses how RIM affects an effective BCP and what aspects should be addressed in relation to risk mitigation, serving as a practical guideline for preparing a BCP and identifying factors to consider.

Looking at disaster recovery and preparedness for the future, Naill Momani states (Momani, 2010):

"It is important to understand the causes of business losses such as human, technology failures or natural and man-made disasters. When we understand the sources of these risks and their potential impacts we could advise strategies to prevent or reduce them to an acceptable level which could be used to prepare effective business continuity plans." (Momani, 2010)

Nissan and the Japanese Auto Sector Recovery

Having analyzed these theories and statements in light of the literature reviewed, it is notable that Nissan has recently recovered from the disastrous earthquake, and a year after the event the company had begun to emerge from crisis. According to a report by Greg Keenan, titled "After a Year of Disasters, Japan's Auto Sector Fights Back," Japanese automakers such as Nissan suffered severe losses, but despite the setbacks the Japanese industry returned to its value systems and its foundational commitment to continuous improvement, taking all measures to gauge the impact of the crisis and to objectively analyze the disaster's effects.

The industry, although unprepared for a disaster of this severity, learned its lessons and has been recovering from the aftershocks by planning alternate solutions in the event of a similar occurrence. Nissan, along with other automakers, faced a severe shortage of microcontrollers — small but essential components — the scarcity of which drew widespread attention to their vital role. By the time that realization set in, disaster had already struck and firms had to cut production to cope with the microcontroller shortage.

Some of the key lessons from this case are summarized as follows:

"The twin disasters of the earthquake and the Thailand flooding have given them a much more extensive and intricate knowledge of their supply base, an understanding that was previously confined to direct suppliers but now extends down to the third- and fourth-tiers. Executives hope this means that after the next earthquake, they won't have to spend weeks or months finding out what part comes from which plant located where. They are requiring some suppliers to keep slightly more inventory on hand than they do now. They will also insist that suppliers have the capability to move tools and dies to another factory to produce parts if a plant producing those parts is damaged. Mr. Shiga of Nissan acknowledged that building in such redundancies goes against one of the key strengths of the Japanese production system — lean production and low inventory. 'But this is also not good for disasters,' he said. 'It was proven.'" (Keenan, 2011)

Conclusion

Eventualities such as disasters might seem to be immovable mountains at first glance, but they are learning experiences, and companies that learn from their mistakes emerge stronger and more prepared.

References

Jones, V. A. (2011). How to avoid disaster: RIM's crucial role in business continuity planning. Information Management Journal.

Keenan, G. (2011). After a year of disasters, Japan's auto sector fights back. Retrieved January 20, 2012, from CTV News.

Momani, N. M. (2010). Business continuity planning: Are we prepared for future disasters? American Journal of Economics and Business Administration, 272–279.

Omar, A., Alijani, D., & Mason, R. (2011). Information technology disaster recovery plan: Case study. Academy of Strategic Management Journal.

Scholtens, A. (2008). Controlled collaboration in disaster and crisis management in the Netherlands, history and practice of an overestimated and underestimated concept. Journal of Contingencies and Crisis Management.

Wan, S. (2009). Service impact analysis using business continuity planning processes. Campus Wide Information Systems.