A procurement manager includes provision on recovery from natural disaster into a through-life specification. Some suppliers suppose that provision is unnecessary. Is procurement manager’s action justified?
A.
No, because with current technology, natural disaster can’t disrupt supply chain.
B.
Yes, because natural disaster may cause risks in organisation’s supply chain
C.
Yes, because the regulations require contract to have recovery provision
D.
No, because this provision will incur unnecessary cost to supplier
Risks like natural disasters - fire, flood, or weather-related event, and cyber-attacks can disrupt the supply chain seriously. Threats and disruptions mean a loss of revenue and higher costs, which leads to a drop in profitability. And businesses can't rely on insurance alone because it doesn't cover all the costs and the customers who move to the competition. Risks must be identified early and supplier should have a plan that ensures continuous operations during disasters.
There are several steps many companies must follow to develop a solid business continuity plan. They include:
- Business Impact Analysis: Here, the business will identify functions and related resources that are time-sensitive. (More on this below.)
- Recovery: In this portion, the business must identify and implement steps to recover critical business functions.
- Organization: A continuity team must be created. This team will devise a plan to manage the disruption.
- Training: The continuity team must be trained and tested. Members of the team should also complete exercises that go over the plan and strategies.
[Reference: CIPS study guide page 138., LO 3, AC 3.2]
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