What does Inflation have to do with Business Continuity?

People often associate business resiliency with IT but it’s really an enterprise wide problem. Business continuity gets challenged by risks enterprise-wide. Your company may be Fort Knox when it comes to technology issues, but is your company prepared if severe inflation or other risks were to occur? Think it’s too remote a possibility to take seriously?

The US is faced with a $14 trillion national debt and a trillion dollar budget deficit with no spending cut in sight. Greece and Ireland have already gone bankrupt. The US could well be on its way.

When private companies go bankrupt they are forced to sell assets or, if they’re lucky, be bailed out by the government. The US isn’t going to be parting with assets such as Alaska or Hawaii, and who will bail out the United States?

So what to do? They could simply print the dollars to cover the debt. The US has already been quietly printing trillions of dollars via quantitative easing. Are you sure all of your risks are covered?

This issue is known as a type II risk or a high-impact, low-frequency risk. These risks occur when tomorrow isn’t like today and happen too rarely for models and historical data to predict. In contrast a type I risk (or a low-impact, high-frequency risk) is the kind that can be predicted by extrapolating past data.

While traditional quantitative models may identify type I risks, they miss type II risks entirely and instill a false sense that everything is taken care of; hyper-inflation is just one of these type II risks. Companies need an enterprise risk management (ERM) infrastructure to identify and address both type I and type II risks. Getting to where you need to be begins with knowing where you are and can ensure smoother business continuity and avoid the need for disaster recovery.

Three things you can do today:

• Take the Risk Maturity Model assessment
• Use a common library of far-sighted root cause indicators to evaluate risk scenarios
• Prioritize your controls based on the risk assessments