The SEC’s proposed rule for registered investment advisers solidifies other regulatory requirements and will mandate the creation of effective recovery plans. There is a vast amount of information available on the hard mechanics of developing and maintaining business contingency plans. Recent events such as Hurricane Sandy in the Northeast United States have made the need for continuity planning clearly evident to most businesses. Two elements are often overlooked in all the guides and post-event whitepapers and summaries, and are behavioral in nature.
Pundits in the 1970’s and 1980’s were concerned that most contingency plans would fall apart because employees would abandon their corporate duties and instead go and stay home to care for their families. History proves otherwise; part of the American psyche is that most responsible employees will do everything they can to help others in a crisis. We celebrate people who go above and beyond to help – virtually every week there is a YouTube video of someone helping a downtrodden stranger. However, employees will first make sure that their families are safe, and will only stay home if there are extenuating circumstances, such as very small children or an elderly parent at home.
Behavior considerations in building a contingency plan:
Contingency plans need to be tested for them to be truly effective. There are too many intangibles involved to nail a plan down 100 percent on your first attempt. Think how difficult it can be on some days to get primary resources functioning as intended – now think about having your regular systems, people, and processes unavailable.
Contingency planning is basically pretending that primary resources are not available and pretending to executing the plan. Many business people are uncomfortable with this – it can feel awkward and artificial, and even silly. However, just as it is unlikely you would use a new business application “out of the box” without testing it at some level, it is unlikely a contingency plan will be effective without testing and challenging it.
Behavior considerations in testing a contingency plan:
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