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Examining “the Business Case” for the New Voluntary Private Sector Preparedness Certification Program. About InterCEP. We are a catalyst focused on Private Sector Preparedness & Corporate Resilience
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Examining “the Business Case” for the New Voluntary Private Sector Preparedness Certification Program
About InterCEP • We are a catalyst focused on Private Sector Preparedness & Corporate Resilience • The Alfred P. Sloan Foundation Funds InterCEP Research on Incentives for Business Preparedness • insurance, rating agency, mitigating legal liability, supply chain, corporate governance • Research Focus on the Linkage of “What” & “Why”of Corporate Resilience
Our Panelists • Al Martinez-Fonts - Assistant Secretary, DHS • Robert Dix, Jr. - V.P., Govt. Affairs, CIP, Juniper Networks • Bob Connors - Director, Preparedness, Raytheon • Pete Jespersen - Director, Bus. Cont. Mgmt., Merrill Lynch • Charles Wallen - Managing Executive, Bus Cont. Committee, FSTC • Raymond B. Biagini - Partner, McKenna Long & Aldridge LLP
Overview • Introduction • Supply Chain Management • Legal • Rating Agencies • Business Reporting • Insurance • Reputation & Other Considerations Absent a “Why” the “What” will not get done
Certification Certification Standard (criteria) Assessment Process (audit)
The Private Sector must be directly involved in the design and implementation of the program. Must assure basic business value!
Current Research What to Do: There are consensus-based standards that indicate “what” good preparedness is. Why to Do It: Internal Incentives: There are a diversity of internal corporate benefits to preparedness although these need to be better clarified & communicated External Incentives: Major stakeholders who may offer external incentives to acknowledge preparedness: Supply Chain Management Rating Agencies Legal Insurance
Combining Multiple Benefits Minimizing Impact of Business Disruptions Insurance Benefits Supply Chain Resiliency Rating Agency Acknowledgement Process Efficiencies, Agility Mitigating Legal Liability Post-Event Reputational, Corporate Governance and other Benefits
Current Research A disconnect for incentives: Major incentive stakeholders may be willing to acknowledge preparedness But they lack an appropriate indicator/assessment And are not necessarily interested in assessing preparedness themselves Critically – there is no historical data on benefits Chain What to Do (Preparedness Standards) < No Strong Connection > Why to Do It (Incentives & Benefits) No Common Indicator if Prepared
Linking “What & Why” The New Program may serve as a link: It may assist in making a more effective connection between good practice (What to Do) & benefits from both internal and external sources (Why to Do It). What to Do (Preparedness Standards) Why to Do It (Incentives & Benefits) Assessment & Certification
Key Considerations for Business Value • Business Involvement in Program Design & Implementation (Management and Practitioners) • Incentive Stakeholder Involvement
InterCEP’s Activities • Hosting Working Groups • Supply Chain Management • Legal Liability Mitigation • Insurance Acknowledgement • Rating Agency Acknowledgement • Developing a temporary online clearinghouse of information relevant to the voluntary business preparedness accreditation and certification program until appropriate body steps up. • Participating in conferences & other forums.
If can’t measure it, you can’t manage it… …and you can’t understand its impacts and reward it!
Supply Chain Management • Increasing need for supply chain resilience due to globalization, interdependencies, etc. • Diversity of current efforts • Challenge of customers – attempting to build your own program, engage and assess multiple suppliers • Challenge of suppliers – diversity of customer assessment approaches, multiple audits • Opportunity for mentoring
Legal Incentives • Tort Negligence • Port Authority ‘93 Bombing Case • Affirmative Defense – advance conformity with a consensus-based industry standard
Rating Agency Acknowledgement • Enterprise Risk Management (ERM) will be added as an element of all corporate ratings by S&P. • Emergency management & business continuity are important elements of effective ERM in addressing operational risk
Rating Agency Acknowledgement • “The extent to which companies are adopting standards, especially voluntary standards, would bolster the view that management has a proactive culture and attitude towards risk. However it’s too early in our process to know what weight we’d place on that evidence.”
Business Reporting • Diversity of reporting requirements currently in some vertical industries, little in others • Need to assure that program is a rationalizing force not a complication • Need to support first, second and third party verification
Insurance • Diversity of companies, product lines, etc. • Unwillingness to define preparedness and measure it • Lack of historical data correlating preparedness with outcomes • Likely incremental with focus on key areas such as business disruption insurance initially
Reputational & Other? • Reputation – differentiator? • Process efficiencies • Corporate agility • May facilitate exchange of best practices • More consistent benchmarking • May forward corporate governance goals • What else? • ARC example
If we can be of help . . . Bill Raisch Director InterCEP- New York University 212-998-2000 william.raisch@nyu.edu www.nyu.edu/intercep
What is a Preparedness Certification? • Uses an accepted assessment process to acknowledge that the current state of organization’s emergency preparedness meets an identified standard(s). • Assessment may be conducted by • The organization itself (first party) • A related organization (second party) • A qualified and independent third party
Typical Certification Steps • Internal review of current state of emergency preparedness (gap analysis) against selected standard • Supplement and/or improve existing preparedness processes, plans & activities to meet intent of desired standard(s) • Decide on first, second or third party verification if appropriate contract with accredited certification body • On-going surveillance and continual improvement processes
Key Players • Accreditation bodiesassess the competenceof and accredit (i.e., approve) certification bodies against a set of accreditation requirements to carry out certain certification activities • Accredited certification bodiesassess the conformityof and certify an organization to certain standards or specifications • The organization seeking certification