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BCM Implementation in EPC Companies

Case:

ABC Inc. is a Project Management company that works on diverse projects like construction, electricity, utilities, civil, infrastructure, chemical, oil & gas etc.

At any given point in time, ABC Inc. works on multiple projects of multiple types with multiple clients and running at various phases (sales, initial, half-way through, closing etc.). Some critical projects are run in BOT (Build, Operate, Transfer) mode also.


About 75% of the employees (mainly the contractors) work at clients’ sites (on an average about 50 projects run from 100 different sites for about 40 clients).

About 25% of the employees work from ABC’s own facilities providing functions like IT, HR, Finance, Legal, Marketing, Business Development, Audit etc. There are multiple sites in multiple cities.


Some projects are across countries, but the majority are in one country. The contractual obligations with the clients include that BCM at clients’ sites is clients’ responsibility.

For its own in-house work (25% workforce), ABC Inc. has experienced, during Covid-19 Pandemic, that almost all can successfully work from home.


ABC Inc. is highly dependent on third parties for supply of workforce as well as goods/ material.


Crisis Management (mainly due to the recent Covid-19 Pandemic) and Crisis Communication at ABC Inc. are more advanced than BCM, while none are formally established. A strong belief prevails in the top management that ‘we have done in the past, and we will do in the future too.’

 

This paper attempts to go deep into the industry and recommend the way forward for ABC Inc. to enhance their Resilience.

 

Summary:

ABC Inc. must establish a formal approach to overall resilience (also known as Organisational Resilience, for which international standard is ISO 22316:2017).

 

Detailed discussions:

Based on my experience (having gone across companies, countries, industry sectors and in different roles), I have found certain gaps even in high maturity (claimed) organisations, despite their 10-15 years of certified journey on some Management Systems:

  1. Scope of the program is not established formally.

  2. Interested Parties scenario is not understood well.

  3. Organisation’s Context is not understood well.

  4. Practice prevails over plans.

  5. Business Processes may exist, Management Processes are generally missing.

  6. Internal Audits are not taken seriously.

  7. There is a high dependency on individuals.

  8. Complex tests (giving high level of assurance on plans and arrangements) are rarely conducted.

  9. BCM is not taken seriously unless it is a regulatory mandate.

  10. Inefficiencies creep in the systems/ processes over a period (most such organisations are in ‘maintenance’ mode e.g. they can maintain BIA, BCM Plans etc., but do not know/ understand how to create these afresh).

  11. Competencies are not appropriate.

  12. Covid-19 Pandemic has created some falls impressions that work from home/ hybrid is easy/ good/ safe/ forever etc.

Assuming ABC Inc. falls in the above category (some of the above points, if not all, are valid for them), the following are recommended.

 

ABC Inc. must start a formal journey to implement (or refine) Business Continuity Management (BCM) – this is recommended to be done per ISO 22301:2019. The full lifecycle is depicted in the picture below:

 

In short, they must formally:

a)      Establish interested parties, and the Context of the organisation

b)      Conduct Business Impact Analysis

c)      Conduct Risk Assessment

d)      Develop continuity strategies

e)      Develop BCM Plans (business continuity, incident-crisis management, crisis communication, emergency, IT Disaster Recovery, cybersecurity, information security etc.)

f)       Test plans

g)      Maintain plans through reviews and audits

h)      Ensure appropriate competencies exist and

i)        The plans and arrangements are improved continually

 

(I will be able to touch upon only a few of the above in this short discussion).

All this is to be done through processes (documented processes, explained later in the paper).

 

Some risks that are typical to EPC industry are listed below, and ABC Inc.’s approach must take care of these:

  • Incompetent contractors

  • Environmental hazards

  • Design errors

  • Safety hazards

  • Labour shortage

  • Acute public scrutiny

Deloitte, on the other hands, predicted the following challenges in 2023 for the Engineering & Construction industry (full report available at https://www2.deloitte.com/us/en/pages/energy-and-resources/articles/engineering-and-construction-industry-trends.html) :

  • Market dynamics: Industry segments experience different growth trajectories and increased competition

  • Supply chain: Increased lead times and volatile material costs pressure margins

  • Future of work: Talent pressures and shifting talent models force industry to rethink workforce strategies

  • Emerging technologies: Developers and contractors further invest in emerging technologies to drive efficiencies

  • ESG & Sustainability: Industry evaluates new practices to deliver positive societal impacts (please await my next blog 'A Real Sustainable Company', a teaser of which was released earlier today in my weekly show - My Top Tips - https://www.youtube.com/watch?v=y9JndH8Odcg&t=17s )


Deloitte continued to say:

In the coming year, E&C companies will be attuned to the different business environments in each of their customer markets and should therefore focus on the following:

 

  • Having better control over leverage and credit, and creating a buffer through additional cost savings

  • Paying attention to changing workforce and workplace expectations and skills levels to more effectively retain talent in a competitive market

  • Increasing the use of digital technologies to improve visibility and efficiency, providing resilience amid ongoing disruption

  • Capitalizing on additional funds and projects arising from the IIJA and Inflation Reduction Act that could provide additional opportunities in the infrastructure segment

Where companies invest, how they approach project delivery, and how they differentiate

themselves in the market is important as the industry becomes more competitive in 2023.

 

I say, ‘Achieving competitive advantage is one of the prime objectives of implementing BCM.’

 

An EPC company may decide to spend more on its Health & Safety program aligning it with BCM/ Organisational Resilience Program. They may also invest more time and effort in their TPRM (Third Party Risk Management).

 

It is good to understand the ‘Interested Parties.’ The following may be an appropriate list of the interested parties for ABC Inc.:

 


Not going deep for each step, just to establish the scope of ‘interested parties,’ please have a look at the picture below:


 

All work (all steps in the lifecycle) needs to be managed through a documented process as depicted below:

 


This can go as deep as for establishing the Risk Appetite (there must be a documented process) for ABC Inc. or even conducting BIA (there must be a documented process) – and for all steps defined in the cycle.

 

The whole program may be under ERM/ Resilience/ Organisational Resilience program or otherwise.

 

About 75% of employees work at clients’ site - these are contractors not working with ABC Inc. directly - ABC Inc. has subcontracted the work. It is advised that the contract management (may not be under BCM Program, but surely under the Organisational Resilience Program) is strengthened to confirm that the subcontracted companies will be responsible for BCM for their employees. This is easy but does not call for/ justify the absence of ABC Inc.’s own BCM. In my experience, where there have been some talks of BCM with the clients, these are superfluous for mainly the reasons that the suppliers (e.g. the EPC company) are relaxed as it is the subcontractors' responsibility while the subcontractors do not have the courage to ask client (e.g. ABC Inc.) about their BCM arrangements.


What makes it more serious is that the clients of ABC Inc. go down, there is a possibility of the EPC company going down!


Let us attempt to understand this with a case. Assume ABC Inc. was working for XYZ Corporation to build an oil refinery, and the project was in construction phase. XYZ’s construction site faced a disaster bringing all activities to stand still. While XYZ Corporation would invoke its BC plan and work according to that (assume for 2 months), ABC Inc. would also need to know whether they would be able to keep their workforce idle for 2 months – what if their limit is 1 or 3 months? ABC Inc. would know this only if they had conducted their own BIA (hence a formal BCM at ABC Inc. is also required). Similarly, ABC Inc.'s subcontractors may go out of business if ABC Inc. syncs.

 

Let us make this case a little more complex. Assume some of ABC Inc.’s employees also were hurt, and some died in the disaster at XYZ Corporation’s construction site. Who would do what; who would pay what compensation and how, to whom; what communication would be done by whom? All these questions need to be thought through before the event, and I foresee, ABC Inc. needing its own documented, tested, effective BCM Plans for this. So, the scope of ABC Inc.’s BCM Plans will not be 25% employees working from its own offices, but the other 75% also who work from clients’ sites (through subcontractor companies, ofcousre).

 

Generally, ABC Inc. will need to have strategies for its own employees:

 

Work from home in the past 2.5-3 years has created many falsehoods. I have conducted 100s of surveys covering companies and countries, males and females, students to freshers to experienced people, and have drawn a list of challenges at home:

  • Physical Infrastructure

  • IT Infrastructure

  • Work-life-imbalance

  • Missed the breakouts of office

  • Boredom

  • Information security

  • Intrusion into my privacy

  • Family disruptions (I had a baby or ailing parents)

  • Did not find the online meetings effective as the cameras were kept off

  • Stress/ Fatigue

 

It is recommended that ABC Inc. takes cognisance of the above in its BCM approach. It is known that the biggest IT Company in India had planned (at the beginning of the Covid-19 Pandemic) a 25x25 program (only 25% of their employees would need to work from the office by 2025 – the rest would be working from remote – mostly home locations). But it is now learnt that those plans have been shelved in past few months and the directive is for all to come back to the office. The same has been happening across other organisations across the globe.


As ABC Inc. is highly dependent on third parties (for workforce as well as for equipment, goods, and materials), a lot of focus will need to be on third (and fourth and fifth) parties.

 

My experience has shown that most companies have gone up to third parties only.

 

Even if ABC Inc. has this belief that they have managed disasters in the past and will be able to manage them in the future also, an improvement in testing will enhance their resilience. Most organisations, known to me, have mostly conducted internal tests, and a lot of those being just tabletop exercises.

 

For all purposes, more efforts should be spent on designing and executing different types of Tests in the Resiliency journey. I recommend these tests to be more rigorous than ever before and involve more interested parties – employees, multiple customers, regulators, public, investors, media, third/ forth/ fifth parties etc.

 

It is recommended that a Disaster/ BCM Fund is maintained for sudden expenses required during a disaster (this recommendation is for all companies in all sectors). Also, that Support functions are spread across locations so that the unavailability of one site does not result in the complete stop of any function. Utilities, generally remain to be the single point of failure – internal storage (of water/ electricity) captive power generation (backup DG sets/ wind/ solar power etc.). For workforce – a bench strength is recommended. This is a great opportunity where ABC Inc. can link its BCM to its Business Strategy. If the focus in the current planning period (1/3/5 years) is on the Oil & Gas industry, then ABC Inc. should have such competent resources on the bench – readily available. Similarly, for acquiring resources from external agencies – the attempt would be to have told them about ABC’s focus on the Oil & Gas industry.

 

ABC Inc. must strengthen its vendor management (onboarding, continuance, and separation) process and activities, including a Substitutability Analysis (rarely performed by companies).

 

ABC Inc. must also explore the ‘mutual aid agreements’ with the competitors (one of the reasons, competitors are now identified as interested parties).

 

Conclusion:

In the long term, ABC Inc. should look at the journey as I depict below:

 


 

This will help ABC Inc. to have pragmatic, cost effective and operable resilience plans to enable the company to achieve its objectives during a major disruption to the company’s operations.

 

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