Benefits of Business Continuity Atsuomi Obayashi Keio University August 2, 2011 Sendai, Japan APEC EPWG Workshop
Benefits Benefit to the Firm itself, by preventing loss. Benefit to Employees, by protecting their lives and employment. Benefit to Customers, by continuing supply. Externality Benefit to Other Agents, by supporting supply chain and local economy.
Problem Caused by Externality : Underinvestment for BCP Marginal Social marginal benefit benefit Private marginal benefit Marginal cost (private) 0 Private Optimum Investment for BCP realization
Countermeasures to Underinvestment ・ Laws ・ Nonlegal standards ・ Incentives of market system ・ Recognition from society
Pros and Cons of the Countermeasures ・ Laws (+) enforceable (-) inflexible in application ・ Nonlegal standards (+) more flexible than laws (-) less enforceable than laws ・ Incentives of market system (+) optimum at each case (-) optimum for contracted party only ・ Recognition from society (+) valid even at unpredictable or incontractible occasion (-) prone to imprecise evaluation
Comparative Study with Environmental Issues Share the underinvestment problem caused bｙ externality. → Similar measures can be effective. cf. Greenhouse gases ・ Laws + Market ex. Emission rights exchange ・ Nonlegal standards + Recognition ex. Voluntary restriction, enhanced corporate image, green procurement
Comparative Study with Environmental Issues Greenhouse gases Many agents and uniform impact → Uniform regulation and market are possible. BCP Limited agents and idiosyncratic impact → Uniform regulation does not fit well.
Proposed Policy Mix for BCP ・ Laws: Minimum requirements for necessary industries ・ Market system: Rewards for BCP in terms of premium and gained contract ・ Nonlegal standards + Recognition Complements laws and market system
Continuity of Civilization
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