1. Identify the one time and recurring costs that should be examined to determin
ID: 391124 • Letter: 1
Question
1. Identify the one time and recurring costs that should be examined to determine the total cost of a strategy.
2. Consider facility, personnel and IT resources. In general, all the resource components identified above are necessary for most organizations. Can you think of organizations that can operate without any one of the identified resource components at least temporarily?
3. Identify the business continuity problems associated with the following types of crisis events:
a. Community-wide crisis events.
b. Crisis events that provide no warning.
c. Crisis events that destroy manufacturing equipment.
4. Identify and discuss strategies that are effective for hurricanes but ineffective for earthquakes.
5. Identify strategies that can introduce inefficiencies to a manufacturer in times of normal operations.
Explanation / Answer
1. One time cost of strategy are the major investments that will incur one time cost and not have to be funded time and again during course of strategy. These include cost of infrastructure, immovable resources like land and building, equipments that are supposed to outlast the duration of event. The recurring costs of strategy are variable costs like consumable items, salaries of workers, utilities cost and other miscellaneous costs that are essential to run the process on daily basis.
2. IT has been the relatively new entrant to the esssential components to run the organisation. In old times when Infornation technology did not enter the mainstream, the organisations functioned efficiently through men and machines. Thus, besides the organisations where technology is at the heart of the process ( IT enabled companies), other brick and mortar organisations will be able to sustain themselves for a limited time without technology, though on temporary basis. The industries with little technological influence, like cottage industries will feel lesser impact,still they will need technology after certain time to communicate with outer world.
3.
(a) The community wide crisis will have greater impact on the human resources function within the company. Other issues will be reduced sales, fewer repeat purchases, disruption of supply and distribution functions and stagnation in the business.
(b) Crisis event without warning may cause damage to facilities, injury to manpower, disruption of movement leading to disruption in supply / distribution, hampered communication within and outside the world, affected manpower due to crisis leading to HR problems, law and order issues etc.
(c) Sudden stoppage of production may lead to disturbed supply and distribution functions, piled up inventory, unfulfilled orders, capacity constraints, affected presence in the marketplace, loss of opportunity cost and market share.
4. The risk mitigation strategy in case of hurricanes can be effective because of the time available between the prediction and the event, which is not the case with an earthquake. In former case, the losses can be minimised by evacuation, reinforcing the infrastructure to minimise the damage to property, issuing warning to the community members to follow guidelines to minimise the damage to the property and life and stay clear from the areas that are expected to be worst hit.
5. Taking precautionary steps in wake of a crisis may affect the manufacturing operations in negative way. Such preventive strategy may include working with limited manpower or for a limited duration, keeping operations closed or running at lower capacity or following a conservative policy of inventory management to be risk averse, which in normal course may prove to be expensive. All these temporary measures may reduce efficiency of the work.
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