Why Don’t Companies Go Bankrupt at the Time of Emergency?
June 10, 2021
Arisa Nokuo & Rena Katsumata
Do you know what the word “BCP” means? It stands for Business Continuity Plan, meaning to ensure that business processes could be properly continued even at a time of emergency or disaster. Japan often suffers from natural disasters such as earthquakes, typhoons and
Photo by Pop & Zebra on Unsplash
floods, this is why many companies set BCP as a part of ESG (Environmental, social and governance) administration.
Palette randomly asked 42 students whether they knew the term BCP and only to find no one knows it. We interviewed Mr. Mitsuhiro Toda of JX Nippon Mining and Metals specializes in risk management operation.
Palette: BCP is a plan to cover business processes and functions when natural disasters are occurred. If companies don’t make it, they would be so risky like stopping businesses and having a bad influence to their stakeholders. This is why we think BCP is a kind of CSR (Corporate Social Responsibility). When I looked your company’s website, I couldn’t find any mentioning about BCP. Why?
Toda: First of all, BCP is a plan for prioritizing the business. When a natural disaster is occurred, we would have to give a priority in operations for the quick recovery of our business. That means we have to prioritize our stakeholders. If we disclose that kind of information officially, some stakeholders might feel offensive when they find their business is not prioritized.
For example, if a manufacturer discloses their first prioritized product line to be recovered a part of BCP, it also means the company would stop other lines. Such message could have a negative impact on the subcontractors and customers or could encourage our competitors by giving them a market opportunity. This is why it’s difficult for a company to disclose detailed recovery plan to the public.
Palette: I thought BCP is not a mere operational plan. Rather, by preparing their operation in emergency, BCP can be also regarded as a part of company’s social responsibility to keep providing their goods and service for the people in difficulty. Do companies consider their BCP in the context of corporate social responsibility (CSR)?
Toda: According to Cabinet Office, only 60% of Japanese company actually set their BCP. But at the same time, even they have BCP, many companies relate BCP to CSR activities. They probably think “We don’t have to release it to customers.” Especially, for the Business-to-Business companies, they do not think it is necessary to explain their operational plan to the third party companies which they do not have any trades. Moreover, they don’t think they have to reach to the general public because these people are not their direct customers. While Business-to-Customer companies care for the general public because everyone is stakeholder like us.
Because the companies have to conduct BCP when necessary, regardless of using these words or not. BCP and CSR really aren’t related each other. I think most companies just care about and respond to their close consumers. However, in the case of Business-to-Consumers companies, their cooperate value is coming from their customers. They might open the information officially as a part of their customer relations.
Palette: I got confused with the difference of BCP and CSR. For example, JX Nippon Mining and Metals constructed a wasted concrete deposit site in the area hit by the Great East Japan Earthquake. Taiyo Nippon Sanso provided the medical-use oxygen for the patients in Tohoku area. In your mind, which do you categorize these activities in, BCP or CSR?
Toda: CSR means that companies are responsible to serve for the society. Whether people evaluate or not, they should just do it. I have worked for 2 companies and both of them had continued to do so. This really means the Corporate Social Responsibility. These days, CSR goes too far to advertise the company.
Palette: Do you mean companies should just do it by their own right?
Toda: Yes. CSR should be done by company’s own right. Currently, evaluation standard sometimes seems arbitrary. For example, some institutions actually evaluate only whether important keywords appear in the integrated report regardless of contexts. There are too many ESG rating institutions and their evaluation standards are varied. To be honest I am skeptical for a company about just fulfilling these criteria.
BCP for the University
Toda: For your information, I’d like to share an example of university’s BCP. Waseda University discloses their BCP including initial response, who plays what roles in the case of emergency, and recovery response at night and holiday. However, some public information is in private such as address. These are established when necessary.
Palette: I think about BCP of the company, but I’ve not thought about university’s one. At the Showa Women’s University, whole-campus evacuation drills are conducted in each semester and emergency rations are stored for the local community. However, I’ve never seen our school BCP. What do you think that university students have to do for further understanding BCP?
Toda: When you learn about BCP and CSR, you have to apply that thinking to yourself by asking yourself, “If I were in charge, what should I do?” In addition, it would be helpful to ask your parents about the hardships of Great East Japan Earthquake.
Palette: You don’t have to start from the big scale but it’s really important to start from things around you, for example, asking the experience of family members or business persons bear you.
Toda: Yes. It’s difficult to ask business persons during this pandemic. Even though, you can learn many BCP factors by sharing experiences with various people rather than solely thinking by yourself.
Interview conducted through the Internet
From the Palette Interviewer
In conclusion, BCP is the prioritization process to restore business as quickly as possible at the time of emergency. It rather creates some risks for companies and stakeholders simply to open the plan publicly. In addition, about the relations between BCP and CSR, we have to take an action whether it would be evaluated or not. This is the social responsibility.
Furthermore, younger generations have to place for themselves and they can ask their parents what they did or how they worked when natural disasters were occurred. We found these are the keys to deepen their understanding about BCP.