Cascade Effects in Business Continuity Planning

What's Business Continuity Planning and Management and Why Is It Vital for Your Company

The corporate world is fraught with risks, uncertainty, and unexpected events that might cause serious damage to your business if they go unmitigated. In the face of all this risk and unpredictability, the business community has to come up with contingency plans. This is how a business continuity plan is developed.

A business continuity plan refers to the steps companies take to make sure they reduce risk to their business and ensure the continuity of the operations of the company. It's called a business continuity plan because it allows them to carry on doing business. This could mean having alternative plans ready, hiring advisors, or planning in accordance to risks specific to a company's industry and sector when faced with a specific setback or a disaster.

It has to include processes for every part of the business, including assets, business partners, employees, data, products or properties. The risks that you plan against might be hurricanes, earthquakes, fires or floods - anything that may significantly and suddenly impact your operations. The business continuity plan has to include recovery planning, recovery and training.

In this article we're not going to give a complete overview of business continuity planning, risk management or the different schools of thought that accompany it. It is an immensely complicated topic that could take an entire book to explain.

Instead, we're going to look at one key area that is one of the primary reasons business continuity planning and business impact analysis are so difficult: cascade effects.

What's Cascade Effects

No part of your company exists in a vacuum, it is all interconnected and each part has a complex relationship with other parts of your company. The sales department will be in jeopardy if the production department doesn't create a product that's up to market standards. The financial department will be affected if the sales department makes a mistake. Any risk that disrupts the continuity of the company will cascade, and this is how we get cascade effects.

By definition, cascade effects are the chain reaction an initial failure/risk/unexpected event kicks off that results in more risk to the continuity of your business. It is quite rare that an initial failure won't result in exposing fault lines in other parts of your business model, which is what makes cascade effects so common and so crucial to learn about.

How Should You be Thinking About Cascade Effects in Business Systems

Although cascade effects might sound complicated to manage at first, there are some common patterns of thinking business managers fall into when dealing with cascade effects that are quite destructive to crisis management. If you know more about these traps, it will be easier to avoid them:

Domino Effect

Many businessmen think cascade effects work like dominoes - one falling piece resulting in the fall of others sequentially in an orderly fashion. This couldn't be further from the truth. In the real world, cascade effects are extremely hectic and one event might set off ten others. They work in parallel and escalate quickly to put a large strain on your business progressively, and this is one of the main reasons why they're so extremely dangerous.

They Occur on all Levels of Business Operations

There's a common misconception that cascading effects could only occur within the same level of operations, i.e. only on the tactical, operational, managerial level, etc., and that there aren't a lot of cascade effects between the different levels of business operations. This is patently false, as we can see from the experience of many companies. The cascade effect can be easily felt at all levels of a company.

Cascade Effects are Usually Small and Inconsequential

Because, often times, the thing that kicks off the cascade effect is small and inconsequential by itself, some businessmen get into the habit of considering the cascade effects small and inconsequential too. This couldn't be further from the truth. As the butterfly effect shows us, even a small initial effect could cascade into something much, much larger than would put strains on the business continuity. This is why it is important to not be dismissive.

How to Create an Effective Business Continuity Plan with Cascade Effects in Mind

Due to the nonlinearity of the cascade effects, a lot of business managers find it hard to conceptualise cascade effects and how to create effective business continuity management plans and accurate business impact analysis with them in mind. It takes time, experience, and knowledge. In this section, we'll go over a few methods you can use to better handle cascade effects:

Try to Visualize Cascade Effects Using Charts and Shapes

One of the best ways of understanding events that occur in a parallel manner is by using visualization techniques a flow chart will aid immensely in learning how a failure somewhere will ripple through various parts of your company. This is an exercise commonly done when business managers think about cascade effects, and you'll certainly benefit from it if you also adopt it as a business practice in your company when planning an emergency response, a resilience scheme, or disaster avoidance. The data for this visualization should be gleaned from your business impact analysis. It is important to realise the dependencies at a macro and micro level. Ensure that during your BIA journey you map these dependencies, even when the dependency sits outside of your operational sphere and indeed outside of your organisation.

Understand That You'll Never Know All the Variables Involved nor All the Cascade Effects

As with many complex systems, it is simply impossible to know all the variables involved nor how the cascade effects will play out perfectly. There are just too many variables out there and the corporate world is hectic by nature. It doesn't lend itself easily to predictions. If there were a way to perfectly know all the variables involved and every failure's cascade effects, almost no company would go bankrupt anymore. This is why you need to have realistic goals for your business continuity management plan and learn how to prioritize certain risks over others.

Things Will Move Quickly Once a Failure Occurs

You have to remember that you have a very limited window to respond to most risks successfully, and if you miss it, you're likely inviting even more failures and risking a potential disruption to business continuity. For example, if one of the base materials you use for construction have their supply chain disrupted, this might cascade into running out of inventory and a complete halt of operations in mere days.

When designing a plan to respond to risks that have known cascade effects, you should always keep the variable of time in mind and devise a plan that could work within very limited time frames. This will be one of your main keys to success.