BP’s Deepwater Horizon costs total $62billion. BP said Thursday that it expects the pre-tax cost of its 2010 Deepwater Horizon explosion and oil spill on the Gulf Coast to total $61.6 billion. The 1989 Exxon Valdez oil spill costs exceeded $7 billion. At market close 25 July 2018, Facebook Inc. was worth $630 billion. A day later: $510 billion.
The roughly $120 billion loss in market capital tops the list of biggest one-day routs in recent stock market history (by $30 billion). Combined, BP and Exxon only amount to a rounded $68 billion; a seemingly paltry number compared to the Facebook one day loss.
Oversight, Governance, Risk and Compliance
According to a 26 July 2018 article entitled, “Sonnenfeld: The Real Problem for Mark Zuckerberg Is Mark Zuckerberg” by, Jeffrey Sonnenfeld, senior associate dean, leadership studies, Lester Crown professor of leadership practice, Yale School of Management:
Privacy concerns, increasing regulation, and now slowing revenue growth all conspired to sack the stock and potentially ignite a sell-off in the sector.
“There have been plenty of warning signs that this is the case at Facebook. Zuckerberg’s adolescent initial leadership style set the stage for a historically disastrous IPO.”
The problem, of course, is that there is nothing to be done other than sell. With a dual-share structure that insures total effective control of Facebook by Zuckerberg for as long as he lives (and maybe beyond), he’s the king and will remain that way, no matter what. A bet on Facebook has always been a bet on Zuckerberg—a great bet, until it wasn’t. It’s terrible structure not just for investors, but for Zuckerberg as well. With total board control and the ability to suppress any internal criticism, unbridled leaders can be left alone to believe their own spin and do not question themselves until catastrophe hits.
In a previous article (21 March 2018), entitled, “Time For Facebook CEO Mark Zuckerberg To Face Facts” Sonnenfeld points to five key realities missed:
1) the underlying Facebook misconduct,
2) the leadership’s efforts to deny and conceal the business model problems,
3) the inadequate personal model set by its top leaders,
4) the governance problem having to do with his unchecked control of the CEO, and
5) the apparent inadvertent complicity of this seemingly disengaged board.
Where is the Business Continuity, Risk Management Intervention?
Has the leadership of Facebook delved deeply into business continuity planning, risk management, cybersecurity, etc.? Or, have they given tacit approval to woefully inadequate tactically based plans, narrowly focused and of limited value? How vested is the company’s leadership and board of directors in addressing critical vulnerabilities, threats, risks and hazards?
Business Impact Assessment/Analysis (BIA): Did the BIA consider the impact of Mark Zuckerberg’s plan to sell 35 to 75 million shares? If that is not a potential business impact; what is? What about assessing the potential impact of misconduct? Governance? Inadvertent or deliberate sharing of sensitive personal information (shared with the Cambridge Analytica)? Failure to conduct compliance audits?
Identifying gaps and potential business impacts should not be limited to tactically focused issues, such as, natural disasters, technology disruptions, cyber-threats, etc. The operative word in the BIA is “Business”. One needs to look at the highest levels of business activities to determine the potential business impacts to the organization, not just the readily identifiable potential impacts.
Planning for Continuity: What does the Business Continuity Plan’s scope consist of? What about the Risk Management Program scope? It would seem that the aforementioned BIA items should have been addressed in the Business Continuity and Risk Management scope of activities; or where these activities considered out of the scope of these programs? Plans and Risk Management are not a regulatory tick in the compliance box; they are integral to the successful achievement of corporate goals and objectives.
Training, Drill, Exercises: Based on the BIA and planning for continuity/risk management; one can only wonder about the scope, depth and frequency of training, drills and exercises that are (or are not) conducted at Facebook. Is there a formal program for these activities? If not, why not? Or are these activities solely tactically focused (i.e., fire drills, evacuation, disaster recovery, etc.)? Who participates in these activities (if anyone)? Has senior management taken an active role in setting standards for performance? Where is the Board of Directors voice in all of this?
Five key areas should be considered going forward. These are:
# 1: The modern business organization represents a complex system operating within multiple networks
# 2: There are many layers of complexity within an organization and its “Value Chain”
# 3: Due to complexity, active analysis of the potential consequences of disruptive events is critical
# 4: Actions in response to disruptive events needs to be coordinated (Strategic, Operational, Tactical levels)
# 5: Resources and skill sets are key issues
The timely identification, classification, communication, response, management and recovery from disruptive events is critical. This is contrasted with increasing numbers of issues and higher and higher costs associated with response and recovery efforts. As such, an organization should seek to continually analyze situations to develop a clear picture of the current state of the business. Referred to as “Data Fusion – Constructing a Mosaic” by LMS; this is a process of getting enough bits and pieces of information in place to transform seeming chaos into recognizable patterns upon which decisions can be made.
Conclusion: Seize the Initiative – Your Reputation and Future Depend on it
A Chinese proverb states that “Opportunity is always present in the midst of crisis.” Every crisis carries two elements, danger and opportunity. No matter the difficulty of the circumstances, no matter how dangerous the situation… at the heart of each crisis lies a tremendous opportunity. Great blessings lie ahead for the one who knows the secret of finding the opportunity within each crisis.
Facebook executives have the responsibility to protect their organization and its stakeholders by facilitating in-depth continuity planning, risk management and preparedness efforts. Using their status as “leaders,” senior management and board members can, and must deliver the message that survivability depends on being able to find the opportunity within the crisis.
Today we cannot merely think about the plannable or plan for the unthinkable, but we must learn to think about the unplannable.
Market research indicates that only a small portion (5%) of businesses today have a viable plan, but virtually 100% now realize they are at risk. Seizing the initiative and getting involved in all the phases of business continuity, risk management and crisis management can lessen the impact of events that could lead to major losses. Just being able to identify the legal pitfalls for the organization of conducting continuity, risk and crisis management audits can have positive results.
About the Author
Geary W. Sikich is the author of “It Can’t Happen Here: All Hazards Crisis Management Planning” (Tulsa, Oklahoma: PennWell Books, 1993). His second book, “Emergency Management Planning Handbook” (New York: McGraw-Hill, 1995) is available in English and Spanish-language versions. His third book, “Integrated Business Continuity: Maintaining Resilience in Uncertain Times,” (PennWell 2003) is available on www.Amazon.com. His latest book, “Protecting Your Business in a Pandemic,” (Greenwood Publishing) is available on www.Amazon.com. Mr. Sikich is the founder and a principal with Logical Management Systems, Corp. (www.logicalmanagement.com), based near Chicago, IL. He has extensive experience in management consulting in a variety of fields. Sikich consults on a regular basis with companies worldwide on business-continuity, risk management and crisis management issues. He has a Bachelor of Science degree in criminology from Indiana State University and Master of Education in counseling and guidance from the University of Texas, El Paso.
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