Retailers must invest in a wider business continuity management approach to deliver long term success in the post-pandemic era
A year into the pandemic, every retailer will have changed their strategy, and no one will be expecting a return to the conditions seen before COVID-19. Business models have moved forward 10 years in little more than ten months to deal with issues ranging from the shift to new online channels creating challenges around ecommerce traffic, fulfilment and last mile delivery; head office support functions like IT and finance moving to remote working; and, changing consumer buying habits and product availability putting new pressures on the supply chain.
Retailers are now – and must be – fundamentally different businesses than they were back in early 2020. But many will not have shifted their approach to business continuity to take into account their changed environment. Simply having a business continuity plan in place that responds to set scenarios like fire or flood is no longer acceptable. Retailers need to adopt a wider business continuity management philosophy – not just a plan – that recognises the key steps required all the way from goods in to goods out, and identifies the dependencies demanded to deliver each of these operational steps; providing enhanced resilience and reassuring key stakeholders that the business is fit for purpose.
Click to queue
According to research by NatWest and Retail Economics, online retail sales notched up five years of growth in the last year, increasing to 28% of retail spending in 2020 (up from 19% in 2019). A lot of brands would have been investing in their ecommerce structure pre-COVID but not at the rate that consumers are now demanding. At a point last year, even Ocado – one of the UK’s most sophisticated ecommerce retailers – had a million potential customers waiting to sign up to their platform and had to implement a queuing system for existing customers, providing some insight to the challenges all retailers have been facing.
Then there’s fulfilment in terms of the additional pressure on the supply chain – particularly as the demand for different products like home office furniture spiked – warehousing and delivery. It’s no surprise that the big ecommerce players have been signing up huge numbers of delivery drivers to meet that demand for last mile delivery.
Of course, while managing all this complexity, retailers have also had to maintain their duty of care for their frontline staff while the big retailers had to move quickly to remote working for office-based staff, in a sector where a remote working corporate structure has never been part of the corporate culture.
Business continuity drags
All these factors add up to long-term change. But many big retailers have not yet adapted their business continuity approach to reflect this change and their realigned business models. Not only can this jeopardise a retailer’s ability to get back up and running quickly following an incident, while minimising financial and reputational problems, it can also have repercussions for their business insurance. In a tougher insurance market, insurers are now demanding not just sight of a retailer’s business continuity plans but also hard evidence that the plan has been validated, tested and is fit for purpose.
Part of the problem is that businesses often regard business continuity as simply a list of who to contact in an emergency and what to do in a range of given scenarios like a flood or a fire. The weakness with this ‘checklist’ approach is that it can be irrelevant if the thing that no one expects happens – like COVID-19 for instance. A much better place for retailers to start is to understand their entire value chain from supplier to consumer, and the critical dependencies required to be able to deliver each operational step along that chain.
Four key dependencies
The dependencies are made up of four criteria: firstly, there is the environment that the process functions within (e.g. warehouse, factory floor, office); secondly, there is the equipment needed to carry out that process (e.g. forklift, IT services, automation, laptop); thirdly, there are the people who carry out these processes; and lastly, there are the supply of materials, data and utilities.
So, it doesn’t matter what type of event happens but rather it is the effect the event has on one, all, or a combination of those dependencies. A retailer will then need to build its recovery strategies on the dependencies associated with operational processes rather than developing a plan against a specific scenario.
It changes the thinking from having a business continuity plan that few may have ever looked at or even tested, to having a formalised and auditable business continuity management system that protects key business processes.
Tried and tested
In many ways, business continuity is where health and safety was in the 1970s. Back then, health and safety was rarely institutionalised whereas now it is a formalised, documented, tried and tested process representing a huge part of a retailer’s corporate governance approach and its legal duty of care to employees and customers. As retailers adapt and build sustainable and profitable business models appropriate for the post-pandemic environment, business continuity must follow the health and safety lead and evolve to that level of integration way beyond representing a rarely dusted off plan filed away.
For more information or any questions you may have surrounding the topics discussed in this article, please contact Patrick Maher.
Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Whilst care has been taken in the production of this article and the information contained within it has been obtained from sources that Aon UK Limited believes to be reliable, Aon UK Limited does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the article or any part of it and can accept no liability for any loss incurred in any way whatsoever by any person who may rely on it. In any case any recipient shall be entirely responsible for the use to which it puts this article. This article has been compiled using information available to us up to 09/04/21.